In an ever-changing industry like finance, it becomes difficult to streamline. This refers to all rules, regulations, market standards, risk management, business conduct and capital management. The first attempt in recent times to standardize payment technology is the European’s Payment Services Directive. The goal of PSD is to regulate payments services within the European Union. It means to achieving this is to welcome competition and participation into the EU’s payment industry. This initiative creates a level playing field among the different methods and factions and ensuring safety and protection of clients, consumers and payment providers. The main two parts of PSD are market regulations and business conduct. Market regulations are a clear and concise set of rules that indicate which types of companies are considered payment service providers. Business conduct indicates that payment service providers must be transparent about payment information, including exchange rates, additional charges and time limitations or approximations.


The Berlin Group, based out of Berlin, Germany, is an organization who’s trying to take things one step further. They define themselves as, "a pan-European payments interoperability standards and harmonization initiative with the primary objective of defining open and common scheme- and processor-independent standards in the interbanking domain between Creditor Bank (Acquirer) and Debtor Bank (Issuer), complementing the work carried out by e.g. the European Payments Council … the Berlin Group has been established as a pure technical standardization body, focusing on detailed technical and organizational requirements to achieve this primary objective.” Berlin Group consists of approximately 40 banks and payment service providers in the European Union. In short, their goals are to try to develop synchronicity in the ‘way of business,’ between acquirers and issuers.


They have focused on PSD and PSD2 laws to develop the “NextGenPSD2” protocol. This new initiative includes fintech, consulting firms and software companies under the standardization process. According to a recent ECB survey, “6 or 7 different API standards exist, not including national standards. But, out of these numbers, 78% of the countries of the EU use Berlin Group’s NextGenPSD2 protocols.” Most European financial institutions acknowledge PSD2 and the UK’s Open Banking regulation as the holy grail of rules and regulations protocol. Not only that, but different regions of the world and beginning to jump on-board with the standardization process. Berlin Group’s most recent conference hosted other countries from the Middle East, Japan and the United States.


The Berlin Group has taken a great initiative in order to streamline API standardization. With so many new factions rising up in the financial industry, it becomes difficult for industry players and their customers to understand the subtle and not so subtle guidelines that are in place. They have taken government rules and regulations and have created a company that helps financial institutions regulate themselves in order for them to be in-line with the existing rules of conduct. The Berlin Group has led to much speculation regarding other aspects of the financial industry, including compliance. In an ideal world, financial companies have their own internal compliance department. The compliance department ensures that the company is adhering to external rules and internal controls, maintaining efficiency and transparency and reduce risks (systemic or criminal).


There are obvious advantages to the standardization of compliance; the first being the development of clear rules, regulations and policies that help employees understand the framework. It isn’t unusual for employees of a financial institution to come from a different industry, therefore, leaving them without any knowledge of the existing policies that are set into place. On top of that, even financial industry veterans have a tough time keeping up with the ever-changing financial climate. With the rise of technology and alternative payment initiatives, rules are constantly being written and re-written. It would benefit all parties involved if a standard set of compliance laws existed and company employees are required to understand what is expected of them.


The next advantage of a standardized compliance company is efficiency. Since most companies employ their own compliance department, rules and regulations can get confused. Sometimes, companies have their own internal policies which contradict actual legal policies. In other cases, some companies are not concerned with their compliance department. They employ them out of obligation but do not consider their findings seriously. This example has been a general movement that has existed in the financial industry. There is no compliance culture within the trade. With contradicting laws, different standards from different countries, regulations within one company but not another, it’s difficult for employees to take the rules and regulations seriously, or even consider them at all. Standardized compliance would be a big initiative to correct a lingering problem within finance.


In order for compliance to be standardized, an ‘umbrella’ organization such as the Berlin Group would need to develop a fair culture of ethics and compliance laws. These laws would need to be in sync with already-existing government regulations as the framework. In addition, the organization would need to look at the subtleties within the industry and rules or policies that exist in thriving firms to see what’s working and what is not. Often, there is a system of compliance protocols. In order to execute the system, the organization would need to specify the roles and responsibilities of each position within a company. Each employee or board member would clearly understand what their part is when compliance matters arise. They would also be clear of the hierarchy within the company and how regulatory processes take place in the case of compliance breaches or risks.


The Berlin Group is an amazing initiative to admire when thinking about the standardization protocols within the rest of the industry. After the most recent European banking scandals regarding Russia, the industry is now being forced to correct its mistakes. The world today is drastically different in the sense that business is all international. Any rules and regulations set in place become difficult to navigate because each country holds their own sets of laws. As the world becomes financially globalized, it is important for initiatives like that of the Berlin Group. A mainstream set of decrees must be put into place throughout the industry. Berlin Group provides a powerful leadership force that should be considered by all sectors of finance. If more organizations could begin to take these initiatives in standardization processes, the global financial system would run more smoothly and ensure safety and clarity to businesses, merchants and customers alike.