The Latvian banking sector actively uses the opportunities provided by the latest financial technology to develop and offer innovative services to its customers and facilitate the development of the Latvian economy.
An increasing number of technology solutions are appearing in the banking sector, the main goals of which are:
- User experience (UX).
ALCB goals for technology use
Technology competence and opportunities in the single EU market
The Latvian financial field in general has significant competence and a high service digitization level, ensuring a good position in the European market. For the faster introduction of innovations in the European financial sector, nine financial and related field associations of Latvia have submitted proposals to the European Commission for a joint position regarding the future of the EU financial market.
Most significant proposals:
- Single EU framework and conditions for all financial service providers
- Broader access to public registers on the EU level for personal identification and assessment of lending ability
- Prompter introduction of remote identification in Latvia
- Gaining clarity regarding the legal framework of blockchain technologies, recognition of various solutions based on such technology at the level of the EU Member States
- Evaluation of possibilities to initiate pilot projects for the application of blockchain technologies in various processes, for example, signing of agreements, digital identity, KYC, thus moving to a fully digitalized process in transactions
Rapid development of technology also brings up digital security matters, including in the use of the services provided by the banks. In order to combine the knowledge and competence of various sectors in the e-security area, the ALCB together with several institutions and companies has created the Digital Security Alliance where private persons and companies can find advice on e-security matters and current issues of the sector.
State administration based on data
The ALCB has asked to have more extensive use of digital solutions in data exchange with state administration authorities. In order to reach this goal, the banking sector participates in the implementation of a Data Driven Nation project in Latvia. In its own operation, the banking sector is moving towards such a management model. Effective cooperation in data exchange between the credit institutions and state authorities would allow for the optimization of administrative and financial resources of all involved parties, improving data exchange management and ensuring the transfer of potential benefits to bank customers - both individuals and companies.
The ALCB has developed a study regarding the cooperation models used by the sector with the registers managed by the state administration and a possibility of making this cooperation more effective.
Open Banking is an open banking platform for cooperation with financial technology companies and other partners. It is a new approach for services in the financial technology area, using API. By using it, third-party developers may design applications and services on the base of the financial institution, ensuring choice and a greater transparency of finances for the bank customers, in respect to both available and private data. Open banking provides an opportunity for the banks and cooperation partners to jointly create solutions for the convenience of customers and business efficiency.
Implementation of the payment service directive
Digital transformation and new framework in Europe - Payment Service Directive (PSD2) and EiDAS Regulation gives banks unprecedented opportunities to provide services on an international level, as the single banking market of Europe is the second largest market in the world. The ALCB believes that the introduction of the directive will open the payment service market for new players, provide opportunities for existing and new business in the creation of new services in the financial sector.
In order to successfully implement the new requirements, the ALCB has formed the PSD2 work force with the participation of members of the bank digital services and IT field, as well as lawyers from 17 banks.
Electronic identification is one of the most significant conditions for the people and businesses of Latvia to be able to receive e-services in the digital market both in Latvia and abroad.
The Latvian banking sector has for a long period of time been the main sector for ensuring the electronic identification of persons for the receipt of e-services in the commercial sector and public administration - in 2016, 98.2% of authentications in the portal Latvija.lv took place using authentication tools of banks.
The new eIDAS Regulation on electronic identification and trust services for electronic transactions in the internal market shall come into force in September 2018. It establishes an obligation of the Member States to recognize and ensure acceptance of the electronic identification tools issued in another EU Member State. The banks support a solution of a safe and conveniently used electronic identification tool created in Latvia, conforming to eIDAS Regulation, which could have an even broader application not only in the scope of Latvia, but also allowing Latvian residents to receive services in other EU Member States.
To ensure the prompter execution of payments in the interbank market, the Bank of Latvia has improved the infrastructure of the payment system and at the end of August 2017 introduced the instant payments service of the interbank payment system ECS. The purpose of introduction of the instant payments solution is to ensure the receipt of funds in the beneficiary’s account in 24/7/365 mode. Broader use of the instant payments system in daily payments will be initiated at the end of 2017 when such service will be provided by several Latvian banks, using both instant payments infrastructure of the Bank of Latvia, and also the instant payments system of the company EBA Clearing formed by European banks.
Contactless payment cards
Banking industry data shows that people in Latvia increasingly use contactless payment cards. The average contactless payment amount in the 1st half-year of 2017 has already doubled compared to the same time last year. The payment cards with the contactless payment option differ from traditional cards with an opportunity to make a fast and convenient payment, not placing the card in the terminal, and for small purchases - without entering a PIN code. High security standards with the EMV chip technology serving as a basis for it are applied to the payment cards with the contactless payment option just like any other payment cards. The banks also offer a contactless payment option, using a phone or a wristband.