The demand for embedded finance is rising and Banking as a Service (BaaS) with APIs and strong risk and compliance capability is offering bundled service, generally white-labeled or cobranded services for non banks to serve their customers.

1. Ramesh Kumar Nanjundaiya
July 2021
Bengaluru, INDIA
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2.  The objective of this non technical presentation is to provide a
bird eye view of how new transformational and impact
technology is influencing all financial activities at a speed.
 The presentation is a wakeup call for Traditional Banking
organization to imbibe new technology to make “customer
service” a very top priority going forward otherwise they could be
left behind.
 This presentation should also give new ideas to graduate
students in Commerce, Business Administration, Data Analytics,
Market Research to explore and seek new non technical
employment with organizations in the Fintech, Neo Bank and
lately BaaS sector which is growing fast and evolving at a rapid
pace and expanding across the length and breadth of India.
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3.  The origin goes back to Digital Financial Inclusion (DFI) which is
of the recent decade. It can broadly be defined as digital access
to and use of financial services by all sections of the country's
population including remote and rural India. This initiative gave
rise to Fintech activities as Payment Banks, Mobile banking, then
Neo Banks and now Banking as a Service (BaaS) platform is
coming up at a good pace. This will bring “customer service” to
an entirely new height across the country.
 While today Traditional banks have worked hard to improve
customer service and experience both online and offline, any
deficiency will be addressed by BaaS platform. This will be in a
separate sophisticated playing ground by addressing end-to-end
customer needs like starting a business or purchasing an asset
where a bank account or mortgage will be an embedded enabler.
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4.  In a non technical way, BaaS (Banking as a service) is a
rather new technological system in financial services and
may be described as an advanced fintech ecosystem which
will greatly directly assist customers, traditional banks and
licensed financial institution by connecting with them via
APIs by way of an end-to-end secured process.
 It removes many of the barriers that businesses and banks
have faced when trying to launch or integrate financial
products, including complex regulation, slow-moving
legacy institutions. It means that financial services are
more open than ever before. To remain competitive and
improve their equity and bottom line, traditional banks will
do well by collaborating into the BaaS space to share their
data and infrastructure.
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5.  An API is a connection between computers or between computer
programs. It is a type of software interface, offering a service to
other pieces of software. A document or standard that describes
how to build such a connection or interface is called an API
specification.
 The term API may refer either to the specification or to the
implementation. In contrast to a user interface, which connects a
computer to a person, an application programming interface
connects computers or pieces of software to each other.
 It is not intended to be used directly by a person other than a
computer programmer who is incorporating it into software. An
API is often made up of different parts which act as tools or
services that are available to the programmer.
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6.  Every decade has seen ongoing new innovation in the
banking sector for the benefit of its customers. This
decade we are into Fintech era.
 Fintech - Financial technology (Fintech) is a new
technology that tries to improve and automate the
delivery and use of financial services.
 A combination of finance and technology helps
consumers, businesses and companies to better
manage their timely financial operations by
depending on specialized software and algorithms
on computers, laptops, smart phones and mobiles.
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7.  Traditional banks with a banking license have
always been known to do two main important
activities: take customer deposits and on lend
these deposits.
 Banks offering financial products and services
undertake significant regulatory obligations. It is
a well known fact that Traditional Banks do face
ongoing technical challenges with cumbersome
and old proprietary software run by the legacy
institutions and have been slow to adopt Fintech.
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8.  BaaS changes all that. It allows businesses to pick and choose the
services they need from a range of dedicated service providers.
 By taking advantage of cost effective and accurate services
through APIs, businesses (big and small) can easily compare and
access all parts of the banking products and all services
(including evolved ones) they may require.
 It is good not only for emerging markets and industries, but also
unbanked locations for banks. As well as lagging behind on the
tech front, the legacy or traditional banks have become
extremely risk-averse, what with rising NPAs and large scale
frauds. This has meant that many, banks are unable to spread
risk and good businesses, especially those in new or untested
markets, have been struggling to get proper banking services.
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9.  BaaS describes the individual products or
capabilities that are created via unbundling of
banking infrastructure and allow access via
their APIs to facilitate specific banking
functions (loans, working capital, cards,
deposits, insurance, payments, managing
payables and receivables, assistance in
economic order quantities for malls, payment
gateways, etc, etc.) in a marketplace model.
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10.  BaaS unlocks banking. It allows businesses to
pick and choose the services they need from a
range of dedicated service providers. By plugging
into those services through APIs, businesses can
easily access the parts of the banking ‘stack’ they
require, in a developer-friendly manner -
allowing them to concentrate on building great
products.
 It is going to be a new source of income for
traditional banks if they open up and partner
with BaaS technology and platform provider.
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11.  Open banking is the system of allowing access and control of
consumer banking and financial accounts through third-party
applications. Open banking has the potential to reshape the
competitive landscape and consumer experience of
the banking industry.
 Open banking functions through APIs. API-banking is a technology
service provided by banks to all third-party firms, provided they
meet the banks’ standards and guidelines. APIs for open banking
platforms are tailor-made and restricted to a fintechs that form
partnerships with banks.
 Open Banking APIs increase the appeal of a bank and enable them to
meet the changing demands of existing customers as well as appeal
to prospective customers. These APIs can also serve as a unique way
to increase customer engagement and attend to customer needs in a
secure, agile, and future-proof method. Open banking will become a
major source of innovation that is poised to reshape the banking
industry.
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12. 
Consumers and businesses will increasingly use
these platforms to access varied services as e-
commerce, telecom, retail business activities,
inventory management, all travel related issues
and medical issues. The Service will also enable
customers to avail loans, buy white goods, get
loan for airticket purchase, children education,
etc.

BaaS is enabled by the seamless integration of
financial services and products into all kinds of
customer activities on non-financial digital
platforms as well.
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13.  A financial institution that wants to offer BaaS
via a distributor can set up a platform for this
purpose based on the latest low-cost, cloud-
native, scalable technology, which will reduce
its cost to serve customers.
 For a traditional bank or financial institution,
it is an opportunity to reach a greater number
of customers at a lower cost at a fast pace
and also reach unbanked but potential
growth areas.
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14.  The process basically starts with a Fintech organization or
a third-party provider by paying a fee to access the BaaS
platform.
 Essentially a traditional Bank or a financial institution will
open its APIs to the third parties/fintech and will grant
necessary access to the systems and information needed
to build new banking products or offer white label banking
services.
 How will this help? This will provide a new revenue stream.
In addition, developing a BaaS solution will also allow
traditional Banks to establish relationships and forge
partnerships with emerging Fintechs. This will help them
keep themselves ahead of the fintech trends once BaaS
becomes popular vehicles.
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15.  Platform banking is quite the opposite of BaaS and open banking.
 In this case, the bank do not share its infrastructure but integrates other firms’
services in its own app.
 The traditional bank model is rather outdated now. It is inferior to advanced
fintech services in terms of innovation and a variety of in-app perks.
 There is a risk for traditional banks in losing customers.
 They will have to invest in technology and adopt external tools to enhance their
offerings..
 Examples of platform banking: One would have noticed a few if you open a
banking app installed on your smartphone.
 Here are typical use cases:
 buying tickets for a bus, train, plane
 buying tickets for various events (concerts, sports matches, etc.)
 online games payments
 charitable contributions
 gift certificates
 etc
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16.  Neobanks are not stand-alone organizations but add-ins on top
of traditional banks.
 Neobanks use standard traditional Banks (who have a licence to
operate) to provide an upgraded finance experience.
 They USP with each and every client is personal touch, superior
service, and lower fees.
 Neobanks do not usually issue big loans or participate in large
financial operations; instead, they operate in other areas as
short-term loans, MSME financing, quick deposits, payments,
and partnerships with well-known retailers.
 So some overlapping between BaaS platform and NeoBanks.
BaaS is way superior in providing total customer satisfaction.
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17.  Baas – Banking as a service is the frontrunner to “open banking” where
traditional banks open up their systems and allow third parties to access
their data to enhance their own services.
 The wave of digitization is here to say and customers are becoming tech
savvy. This growing market is transforming retail banking, reshaping
relationships with customers and paving a way for fintechs.
 AI, IoT, and cloud solutions for customer-facing operations (e.g., CRM
software) will be on the rise.
 The financial service sector will look forward to virtual call centers,
online account opening procedures, loan automation, and
automated/chat-based customer support.
 BaaS with their tech-expertise, can eventually function as a digital
front-end to the entire core banking operations, customised products
and solutions.
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18.  While the concept of BaaS is based on SaaS
(software as a service) which allows users to
subscribe to function specific service over the
internet instead of installing applications on
their computers, BaaS on the other hand
enables users to access all financial services
over the internet. As stated earlier on, it does
this via traditional banks offering their
infrastructure to third party service providers
as Fintechs who offer the entire gamut of retail
banking services via use of application
programming interfaces (APIs).
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19.  This would be the start of immense possibilities for embedded
finance in every customer journey.
 It may be remembered that Fintechs provide various banking
offerings to their customers by building their services on top of the
existing regulated infrastructure of licensed banks. This enables
service providers to embed a wide range of financial services into
their package of offerings for their customers. The customers are
not themselves account holders in the supporting bank.
 The most essential aspect of BaaS is that they enable what is termed,
pay-for-service banking. Fintech companies can easily pick from a
range of financial products and then customise them to the needs of
their customers. By this way, they can create new financial platforms
of their own. The scale of opportunities is immense. There is a huge
and growing business potential via BaaS platform.
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20.  Thank You
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