Cashfree Payment, a payments and API banking solutions company, announced the launch of an industry report titled ‘Changing the retail banking landscape via savings account APIs’. The report deep dives into the Indian landscape of savings account APIs, the innovation it enables and how this is changing the future of retail banking in India.
It also presents the views of established and emerging fintech players in the Indian retail banking space, on various key aspects, ending with a proposal for a new regulatory model for a licensed BaaS intermediary. This will create a ‘super fintech’, enabling white-labelled front-end business correspondents, neobanks and other fintech models operating on the bank-fintech partnership model.
The report highlights that APIs can ‘decentralise’ banking, thus changing the way savings accounts of the future will be opened, accessed and managed. Savings account functionalities like deposits, cash withdrawals, payments, funds transfers, among others, can turn into a set of APIs, each of which then becomes Banking as a Service (BaaS) products to be leveraged. For banks, these allow them to unbundle and enable core processes like account opening, transactions and account management through fintechs, creating new retail banking touch-points.
In the retail banking space, there are significant opportunities for fintech players including the so-called neobanks to cater to new and untapped markets. Banks have also recognised the monetisation opportunity of fintech partnerships, and are continually increasing the products they via APIs and exploring new partnerships. In order to address this new-to-market audience, fintech players can leverage savings account APIs across the country to transform the retail banking experience for customers.
The report dives into the various forms savings account APIs take, and the specific use-cases and innovation it enables in the space, including targeted service offerings for millennials, agriculture marketplaces, family focussed financial services, and others. It also allows existing fintechs and B2C marketplaces to diversify into new offerings to their existing customer base. It discusses the specific advantages that API aggregators offer from an infrastructure point of view, by aggregating APIs and providing APIs, SDKs and ‘no-code’ based solutions for quick integrations and launch of financial services.
The report explores the multiple existing options for neobanks and other such players in the Indian regulatory space. The business correspondent channel is the most common, along with the recently introduced guidelines for Digital Banking Units (DBUs), allowing banks to leverage these to expand their digital footprint. Others include the prepaid payment instrument licenses, small bank licenses, Account Aggregator framework, and so on, each of which enable different capabilities for fintechs and comes with different restrictions. The DBU route further adds to the available routes for fintechs to engage with scheduled commercial banks, also making it an important means of driving financial inclusion via the BaaS route.
From a regulatory standpoint, in the case of neobanks, the Niti Aayog and the RBI via its Report on Digital Lending have put forth proposals, but indications are that these will not be considered immediately. In view of this, the report proposes an alternative solution, a regulatory model enabling BaaS-fintech partnerships via a ‘super-fintech’ platform,. This is essentially a licensing framework for a BaaS intermediary, enabling tiered access to banking and other financial APIs, and enabling white-label BCs and other such BaaS-driven fintech models.
Fast-paced fintech innovation today needs an equally dynamic regulatory framework. The proposed framework in this paper aims to provide fintechs with the flexibility to integrate quickly, provide services from multiple back-end partners and enable easy scalability, all within the oversight of the regulator. By aggregating APIs across multiple regulated entities, a super-fintech’s role will be to enable secure, efficient and aggressive distribution of banking services and even fintech innovations like Open Credit Enablement Network (OCEN).
Akash Sinha, CEO and Co-Founder, Cashfree Payments said, “It gives us great pleasure to launch this report on the rapidly evolving landscape of retail banking. We believe that Bank-Fintech partnerships will drive the next generation of banking services. Fintech innovation and bank-fintech partnerships are reaching the core of banking services through neobanks today, and customers can look forward to an exciting new retail banking experience.”