Savings account APIs to transform retail banking in India
Cash free payment, a payment and API banking solution company, announced the launch of an industry report entitled “Changing the retail banking landscape through savings account APIs”. The report delves deep into the Indian landscape with savings account APIs, the innovation it enables and how this changes the future of retail banking in India.
It also presents the views of established and new fintech players in the Indian retail banking area, on various key aspects, and concludes with a proposal for a new regulatory model for a licensed BaaS intermediary. This will create a “super fintech”, enabling white-collar front-end business correspondents, neobanks and other fintech models operating on the bank-fintech partnership model.
The report emphasizes that APIs can “decentralize” banking, and thus change the way future savings accounts will be opened, accessed and managed. Savings account functions such as deposits, cash withdrawals, payments, money transfers, among others, can become a set of APIs, each of which becomes Banking as a Service (BaaS) products that can be utilized. For banks, these allow them to separate and activate core processes such as account opening, transactions and account administration through fintechs, and create new contact points for retail banking services.
In the retail banking area, there are significant opportunities for fintech players, including the so-called neo-banks, to meet new and untapped markets. Banks have also recognized the opportunity to monetize fintech partnerships, continuously increasing their products through APIs and exploring new partnerships. To meet this new target audience, fintech players can leverage savings account APIs across the country to transform the retail banking experience for customers.
The report delves into the various forms of savings account APIs, and the specific uses and innovation it enables in space, including targeted services for millennials, agricultural marketplaces, family-focused financial services and others. It also allows existing fintechs and B2C marketplaces to diversify into new offerings for their existing customer base. It discusses the specific benefits that API aggregators offer from an infrastructure standpoint, by aggregating APIs and offering APIs, SDKs and ‘no-code’ based solutions for fast integrations and financial services launches.
The report explores the many existing alternatives for neo-banks and other such players in the Indian regulatory area. The business correspondence channel is the most common, together with the recently introduced guidelines for digital banking units (DBU), which allow banks to utilize these to expand their digital footprint. Others include licenses for prepaid payment instruments, licenses for small banks, Account Aggregator frameworks, and so on, each of which enables different features of fintech and comes with different limitations. The DBU route further adds to the available routes for fintechs to engage with planned commercial banks, and also makes it an important means of driving financial inclusion via the BaaS route.
From a regulatory point of view, when it comes to neo-banks, Niti Aayog and RBI have submitted proposals via their report on digital lending, but indications are that these will not be considered immediately. In light of this, the report proposes an alternative solution, a regulatory model that enables BaaS fintech partnerships via a ‘super-fintech’ platform. This is essentially a licensing framework for a BaaS intermediary, which enables incremental access to banking services and other financial APIs, and enables white-label BCs and other such BaaS-powered fintech models.
Rapid fintech innovation today needs an equally dynamic set of rules. The proposed framework in this article aims to give fintechs the flexibility to integrate quickly, offer services from multiple back-end partners and enable easy scalability, all within the regulator’s oversight. By pooling APIs across multiple regulated entities, the role of a superfintech will be to enable secure, efficient and aggressive distribution of banking services and even fintech innovations such as the Open Credit Enablement Network (OCEN).
Akash Sinha, Cashfree Payments CEO and Co-Founder 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 banking-fintech partnerships reaches the core of banking services through neobanks today, and customers can look forward to an exciting new banking experience for retail. ”