Reimagining fintech: Banking-as-a-service, embedded finance can unlock new value chains
Recently, Yes Bank announced that it has partnered with bank-as-a-service (BaaS) startup, Falcon, to tap into the fast-growing embedded finance market. Yes Bank is one of the pioneering banks that have embraced the BaaS model, which helps rationalize technology costs and reduce time-to-market, thereby empowering the bank to launch competitive offerings quickly.
The partnership with Falcon will enable Yes Bank to provide customers with tailored financial solutions by leveraging Falcon’s broad product range, supported by technological infrastructure. Prabhtej Bhatia, co-founder of Falcon, said, “We are already working with the bank to introduce more innovative use cases and product lines, and the initial traction and response from customers has been phenomenal.”
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At a macro level, the banking and finance industry is in the middle of a technology-driven transformation phase, and it is assumed that the banks of the future will look very different from today. Embedded finance is the latest buzz as it completely changes the banking and financial services landscape.
As such, embedded finance allows brands and businesses to integrate financial services into their existing platforms and applications and naturally offer financial products to their customers. It is undoubtedly one of the fastest growing sub-segments in the fintech ecosystem. As more financial providers embark on their digital transformation journeys, embedded finance will become even more widespread, contextually displacing the need for traditional banking.
Classic examples of embedded finance are digital lending, payments, insurance, investments and combinations of these. Hyderabad-based Jocata is another player that helps financial institutions offer embedded solutions, develop innovative business models and grow their loan books.
Prashant Muddu, MD & CEO, Jocata says, “For financial institutions, embedded finance is not only an opportunity to reach a larger number of customers at a lower cost, but also the opportunity to open up new revenue lines, capitalize on cross-selling opportunities and deepen relationships with the customers, but often in a way behind the scenes.” Currently, the Jocata platform manages lending including embedded lending use cases for private and public sector financial institutions such as Axis Bank, Bank of Baroda, IndusInd Bank, Kotak Mahindra Bank, Federal Bank, among others.It also has retail and B2B solutions such as proprietary GST -based scoring – SMB DNA and analytics for higher loan success rates.
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Players like Jocata are constantly evolving to enable new models in the market specific to embedded finance use cases, leveraging technologies to build solutions such as Decision-as-a-Service (DaaS), Lending Evaluation and Analytics Platform (LEAP) that enables customers to avail a loan in a few steps of the checkout journey on a merchant/e-commerce platform’s payment gateway and AI/ML-based credit assessment results that leverage data from sources such as GST, bank statements, financials, etc., to assess private – and business customers to identify risks and opportunities.
“While we have been entrenched in the corporate stack of large banks, we are also enabling them for embedded funding through the FinTech SaaS route,” says Muddu. “The mobile and data boom in India, digitization of commerce, digital availability of identity and other data, opened opportunities for embedded finance in non-financial customer experiences.”
According to him, upcoming ecosystem innovations and protocols such as NBFC-AA, OCEN (Open Credit Enablement Network), ONDC and India Digital Stack will ease existing friction points in these new economy enabled journeys and increase customer demand.
