Financial Services News

Reimagining fintech : Banking-as-a-service, embedded finance can unlock new value chains

Recently, Yes Bank announced that it has partnered with banking-as-a-service (BaaS) startup, Falcon, to tap into the rapidly growing embedded finance market. Yes Bank is one of the pioneering banks that have embraced the BaaS model, which helps in rationalising technology cost and reduce time-to-market, thereby empowering the bank to launch competitive offerings rapidly.

The partnership with Falcon will enable Yes Bank to provide customers with tailor-made financial solutions by leveraging Falcon’s wide suite of products, backed by technological infrastructure. Prabhtej Bhatia, co-founder of Falcon, said, “We’re already working with the bank on introducing several innovative use cases and product lines, and the initial traction and response from customers have been phenomenal.”

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At a macro level, the banking and financial services industry are in the midst of a technology-led transformation phase, and it is believed that the banks of the future will look very different from today. Embedded finance is the latest buzz as it is entirely changing 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 natively offer financial products to their customers. Undoubtedly, it is one of the fastest-growing sub-segments in the fintech ecosystem. As more financial providers embark on their digital transformation journeys, embedded finance will be even more widespread, contextually displacing the need for traditional banking.

Classic examples of embedded finance are digital lending, payments, insurance, investments and combinations thereof. Hyderabad-based Jocata is another player that is helping 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 greater number of customers at a lower cost, but also the chance to open up new revenue lines, capitalise on cross-selling opportunities and deepen its relationships with customers, although often in a behind-the-scenes manner.” Currently, the Jocata platform powers lending including embedded lending use cases for private and public financial institutions like 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 score – SME 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, and are leveraging technologies for building solutions, such as decision-as-a-service (DaaS), lending evaluation & analytics platform (LEAP) that gives customers the ability to avail a loan in a few steps within the checkout journey on a merchant’s/e-commerce platform’s payment gateway and AI/ML-based credit assessment scores that leverage data from sources such as GST, bank statements, financials, etc., to assess retail and business customers to identify risk and opportunities.

“While we have been entrenched in the enterprise stack of large banks, we are also enabling them for embedded finance through the FinTech SaaS route,” says Muddu. “The mobile and data boom in India, digitisation of commerce, digital availability of identity and other data, opened up opportunities to embedded finance in non-financial customer experiences.”

According to him, upcoming ecosystem innovations and protocols like NBFC-AA, OCEN (Open Credit Enablement Network), ONDC and the India Digital Stack will ease existing friction points in these new finance-enabled journeys and fuel customer demand.

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