The European payments landscape has embarked on a transformative journey with the introduction of the SEPA Payment Account Access (SPAA) scheme. This major initiative aims to enhance the accessibility, commercial viability, and value of Open Banking across Europe. Developed by the European Payments Council (EPC), SPAA transcends the foundational framework established by the EU’s Payment Services Directive 2 (PSD2) by providing a new level of secure, API-based access to payment accounts. This innovative setup facilitates interaction among third-party providers, asset brokers, and account holders in a balanced environment designed to drive innovation and competitiveness within the financial ecosystem.
Addressing the Investment Challenge in Open Banking
The Financial Burden of Open Banking
The primary aim of the SPAA scheme is to resolve a critical challenge in Open Banking—motivating banks and financial institutions to invest in Open Banking infrastructure. Historically, the lack of commercial incentives has made financial institutions hesitant to invest, considering the significant costs and limited returns. For instance, in the UK, the annual cost of Open Banking stands at GBP 100 million, with cumulative investments reaching GBP 1.5 billion, as per the Future of Payments Review. Across Europe, with a larger number of banks, the financial burden is even more substantial. The widespread hesitancy to spend on such infrastructure has hampered the full-fledged adoption of Open Banking, posing a significant obstacle to innovation within the European financial sector.
Introduction of Premium APIs
To address this, SPAA introduces ‘premium’ APIs that offer enhanced features beyond the free, basic APIs mandated by PSD2. These premium services enable financial institutions to monetize their Open Banking investments, making the framework sustainable and attractive to a broader market. The SPAA scheme involves four key stakeholders: Asset Holders, Asset Brokers, Asset Owners, and Asset Users. Asset Holders are institutions that manage payment-related assets. Asset Brokers access these assets on behalf of their customers, the Asset Users. Asset Owners, which can be individuals or firms, entrust Asset Holders with managing their payment transactions, while Asset Users access transaction or information assets through Asset Brokers, with the Asset Owner’s consent. This well-structured, mutually beneficial system aims to foster growth, transparency, and competitiveness while providing tangible commercial incentives to participating institutions.
Evolution and Development of SPAA
The Inception of SPAA
The journey of SPAA began in earnest in 2021 when the European Retail Payments Board tasked the EPC with managing a new API Access Scheme, which eventually became SPAA. This new mandate offered an opportunity to rethink and improve the security and efficiency of payments across Europe. SPAA was envisioned to expand beyond the limitations of PSD2 by introducing a business-friendly model that incentivizes participation rather than presenting compliance as a burden. The concept aimed to provide a more robust infrastructure where Open Banking could thrive, leveraging secure, API-based access to facilitate streamlined interactions between all key players in the financial ecosystem.
Publication of the SPAA Rulebook
SPAA gained significant momentum in 2022 when the EPC published the first SPAA rulebook. This rulebook outlined standards, protocols, and practices for smooth data exchange and payment transactions, especially through Premium APIs that surpass PSD2 requirements. These Premium APIs include features such as Dynamic Recurring Payments (DRP), Europe’s version of Variable Recurring Payments (VRP). DRP supports functionalities like one-click checkouts and seamless subscription renewals, enhancing both user and merchant experiences. The introduction of these advanced functionalities aimed to make Open Banking more attractive and practical, providing added value to both financial institutions and end-users while setting the stage for widespread commercial adoption.
Updates and Pilot Program
In 2023, the SPAA rulebook was updated to version 1.1, and the EPC also released the SPAA Default Fees guide. These fees apply to Premium services delivered through SPAA’s API but maintain flexibility, allowing asset holders and brokers to negotiate lower fees if desired. SPAA’s adaptable model ensures that all stakeholders can derive benefits without facing rigid costs. A pivotal development in SPAA’s evolution is the tactical pilot program announced in May 2024. The EPC invited asset holders and brokers to test the SPAA rulebook, pricing model, and framework within this pilot program. Currently, six Asset Brokers and one Asset Holder are participating, helping the EPC gather insights to refine SPAA for a full-scale rollout. This pilot program is crucial for preparing SPAA for the market, with the ultimate goal of expanding account-to-account (A2A) payments across the EU, offering a more efficient and secure alternative to traditional payment methods.
Key Features and Use Cases of SPAA
Dynamic Recurring Payments (DRP)
Dynamic Recurring Payments (DRP) is one of SPAA’s standout features, providing a flexible, user-friendly payment experience well-suited to today’s e-commerce and subscription-based economy. DRP offers greater control over recurring transactions, appealing particularly to younger consumers who value transparency and ease of use. For merchants, DRP facilitates predictable payment collections, aiding cash flow management, especially for subscription services. Merchants stand to benefit tremendously from this feature by offering efficient, seamless, and customer-friendly payment options that enhance user experience and boost retention rates. DRP also allows for greater customization in payment plans, reflecting the varied and dynamic nature of subscription models in modern businesses.
Diverse Applications of SPAA
SPAA’s design supports diverse applications, from simple payments to complex financial services. Key use cases include retail payments where SPAA’s A2A model supports seamless transactions for both online and in-store payments, reducing dependence on traditional card networks. Dynamic Recurring Payments (DRP) are ideal for subscription models such as media streaming, gym memberships, or recurring bills. Unlike direct debit, DRP allows adjustable payment mandates, making it suitable for variable monthly payments. Additionally, data aggregation facilitated by SPAA enables both consumers and businesses to make informed financial decisions by presenting aggregated financial data.
Payment Certainty
The European payments landscape is undergoing a significant transformation with the launch of the SEPA Payment Account Access (SPAA) scheme. This groundbreaking initiative aims to improve the accessibility, commercial viability, and overall value of Open Banking throughout Europe. Developed by the European Payments Council (EPC), SPAA goes beyond the foundational framework set by the EU’s Payment Services Directive 2 (PSD2).
It introduces a higher level of secure, API-based access to payment accounts. This new structure is designed to facilitate seamless interaction among third-party providers, asset brokers, and account holders. By creating a balanced environment, the SPAA scheme encourages innovation and competitiveness within the financial ecosystem.
This advancement represents a major step forward in enhancing Open Banking, ensuring that financial services are more accessible and beneficial to users across Europe. The API-based access provided by the SPAA fosters a more dynamic and competitive financial market by enabling third parties to offer new and improved services.
Furthermore, this initiative is expected to drive growth and innovation in the financial sector by providing a robust and secure framework for accessing payment accounts. The SPAA scheme is set to redefine the way financial services operate in Europe, promising to deliver greater value and convenience to businesses and consumers alike.
