Fintech startups spot a lucrative space in ‘open banking’
Startups are now offering a broader set of banking services, pointing to a deep integration with lenders that could change banking in many ways.
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, CEO of Open, a Bengaluru-based fintech startup.
Another 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, CEO, 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 UK, 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 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.
API services will allow startups to access the core systems of banks in a secure and restricted environment. “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.
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.