Fintech startups spot a lucrative space in open banking
Fintechstartups have started offering a broader set of banking services beyond payments and lending, pointing to a deep integration with lenders that has the potential to change the way customers access banking products.
While banks are good with settlement, security and credit checks, fintech entities can help customers in ease-of-use.
For instance, reconciliation between multiple current accounts of a business through one portal and lending at Point of Sale otherwise meant for payments are some of the ways in which ‘open banking’ is gaining ground. Creation of a common platform for inventory management, payments and real-time settlements is another use case.
“Open banking as a concept has taken off in developed markets already; in India, startups can collaborate with banks to bring in disruptive practices while compliance issues, settlements etc. can be managed by banks,” said Anish Achuthan, chief executive officer of Open, a Bengaluru-based fintech startup.
Open works closely with lenders such as ICICI Bank to offer the entire business banking suite to small businesses.
Another Bengaluru-based payment gateway, Razorpay, is expanding into broader financial services through its newly launched Razorpay X.
Unlike a banking account that is just transactional in nature, the Razorpay X platform gives an overall view of the financial health of the organisation, allowing business leaders to take specific actions accordingly.
“The finserv market is ready for the not-so-traditional modes of banking such as API banking and UPI has been a big move in that direction,” said Harshil Mathur, chief executive officer, Razorpay. “The application of IndiaStack APIs and the Bharat Interface for Money also proves that the government backs the idea of open banking in the country.”
While startups like Tide in the United Kingdom, Holvi in Europe and Seed in the US are showing the way, seasoned Indian tech entrepreneurs are trying to adopt these for India.
Recently, Flipkart co-founder Sachin Bansal met Reserve Bank of India officials in Mumbai to explore opportunities in banking. Kunal Shah, who founded digital payments app Freecharge, is now targeting the underpenetrated credit card market with his newly launched Cred.
Nikhil Kumar and Sahil Kini, erstwhile members of software industry think tank iSPIRT, teamed up recently to start Setu that offers Application Programming Interface (API) infrastructure to startups to work closely with financial services companies.
API services will allow startups to access the core systems of banks in a secure and restricted environment.
“The need for API banking emerges from the fact that consumers trust banks but want differentiated experience and services,” said Amrish Rau, head of fintech investments and partnerships at PayU “Retail banking apps in India are very good but lending, payments and business banking need a lot of improvement which these tech players can bring in.”
Banks are also keen on partnering with fintech players for ‘open banking’.
“Now, there are different solutions emerging in the API banking area to cater to different aspects of the customer journey,” said Deepak Sharma, chief digital officer, Kotak Mahindra Bank. The Mumbai-based lender, which started offering API banking seven months ago, has more than 100 partners who use its APIs for multiple purposes.
“These APIs are not commodities, we are also looking at exploring last mile use of banking services through these partners,” he said.
Banks have certain limitations, including compliance processes within which they need partner entities to operate, as any irregularities will attract the ire of the banking regulator.
“We can act as the plumbing pipes for these service providers, but checks and controls are important; if our partners can work within the criteria that we have set, it is best for both,” said Ritesh Pai, chief digital officer at Yes Bank.
Source: ET Tech