{"id":1155,"date":"2020-11-06T12:00:41","date_gmt":"2020-11-06T06:30:41","guid":{"rendered":"https:\/\/open.money\/blog\/?p=1155"},"modified":"2024-05-29T14:37:50","modified_gmt":"2024-05-29T09:07:50","slug":"baas-will-lead-the-evolving-fintech-paradigm","status":"publish","type":"post","link":"https:\/\/open.money\/blog\/baas-will-lead-the-evolving-fintech-paradigm\/","title":{"rendered":"The evolving fintech paradigm – BAAS will lead the way"},"content":{"rendered":"It\u2019s often been said that we live in extraordinary times. Not only is it true of the pandemic we\u2019re experiencing but also of the fintech revolution that is quietly taking place amongst us.\r\n\r\nAs a founding member of one of the globe\u2019s fastest-growing neobanks<\/a>, I have had the good fortune of going beyond shallow waters and dive deep into the upcoming market & technological trends shaping our financial future.\r\n\r\nThree years ago, when I co-founded Open<\/a>, the big banks had just started to open up to the idea of collaborating with fintech companies. And just a year before that, demonetisation forced India to consider digital payments as a legible option.\r\n\r\nFast forward to 2020, a total of 155 banks<\/a> are now live on UPI. In September, they clocked 1.69 billion transactions<\/a> which were worth INR 2.98 trillion. Meanwhile, here at Open, we saw a 164% rise in the value of collections made online by businesses. This is a clear indication of an up and coming trend.\r\n

Digital India is now leading the way to a fintech revolution<\/strong><\/span><\/h2>\r\nThe 2,174 fintech startups<\/a> that operate out of India have a pivotal role to play here. They\u2019ve been merging financial services with every single layer in our daily lives.\r\n\r\nBut, and there\u2019s always a but<\/em>, banking has been the slowest amongst the rest of the financial services. The reason being, unlike other financial services, banking has always been a brick-and-mortar service provider.\r\n\r\nBut, most people don\u2019t want to think about banking. They just want it to work. This is true of people like you and me. This is also true of businesses who have to focus on scaling and have very less time to bother about day-to-day banking.\r\n\r\nThis is exactly where neobanks like Open come in. To bridge the gap between banks and the customers who now expect a fully digital & seamless banking experience.\r\n

Ladies and gentlemen, welcome to fintech 2.0!<\/strong><\/span><\/h2>\r\nIn the previous paradigm, banks forced customer journeys to revolve around them. This changed rapidly when PSD2 was administered by the European Commission in early 2016, which in turn led to a rise in open banking<\/a> practices.\r\n\r\nIt all started in 2013 when RBL Bank & Yes Bank exposed their APIs<\/a> to other developers\/partners to build innovative financial services. Back then this was limited to powering a few of the leading wallet providers who didn\u2019t have a PPI (Prepaid Payment Instruments) license. Soon enough, many other banks like ICICI Bank, DCB Bank, and Kotak Bank followed suit.\r\n\r\nThe game has become much bigger in 2020. And those of you who are fans of World of Warcraft like I am will know that it is now a multilevel one with multiple players who are working towards building their own empires.\r\n\r\nOr in simpler terms, non-finance businesses are now looking to build & offer integrated financial services to their customers. We now live in a world where a food delivery company can soon provide a debit card to its customers for retaining loyalty points and other rewards.\r\n\r\nAnd the magic tool which allows them to do so? Banking-As-A-Service or BAAS<\/a> – the latest buzzword to rock the fintech ecosystem.\r\n\r\nIf you\u2019re a business owner, you can use BAAS to offer your customers your own debit card<\/a> where they can collect loyalty points thereby increasing your brand engagement. You do not need to rely on a bank to partner with you anymore.\r\n\r\nJust a few lines of code and any business can become a banking or rather a financial services provider. That is the beauty of BAAS.\r\n\r\nOk, understood. But considering that banks are already providing BAAS, a pertinent question arises here.\r\n

Are 3rd party BAAS providers going to be redundant soon?<\/strong><\/span><\/h2>\r\nThe honest answer – no, not at all.<\/em>\r\n\r\nWhile legacy banks are still struggling to update their APIs<\/a> to the modern infrastructure, 3rd party providers have been quick to provide easy-to-adapt API infrastructure<\/a> to businesses to build a variety of financial verticals for themselves.\r\n\r\nThey provide a less stringent compliance procedure which means that it only takes a business about 2-3 months to build, test and finally release a financial product out of the sandbox. FYI, this process takes about 8-9 months with a traditional bank.\r\n\r\nMy point is: 3rd party providers, by the nature of their flexible structure, can provide customized offerings to each and every one of their customers. This means that small and medium businesses who up until now did not have any customized banking solution can now look forward to having all their banking needs (and more) taken care of, the way they want it.\r\n\r\nAnd in India, we\u2019re talking about taking care of banking for all 51 million SMEs. This number is only growing day by day.\r\n\r\nSo yes, BAAS providers are here to stay and they\u2019re at the helm of the financial revolution that is slowly but surely penetrating our lives.\r\n\r\nTruly what exciting times we live in!\r\n\r\n \r\n\r\nRelated Articles –\r\n\r\nNeobanking for SMEs: A lawyer\u2019s take on fintech<\/a>\r\n\r\nFast & Furious: The metamorphosis of fintech<\/a>\r\n\r\nAPI Banking: The fast track to building fintech products<\/a>\r\n\r\nOpen\u2019s BIG reveal at Singapore Fintech Festival 2019<\/a>\r\n\r\nOpen to revolutionize recurring payments for small businesses with UPI AutoPay<\/a>\r\n\r\nWhy you need a business account, now more than ever<\/a>\r\n\r\n \r\n\r\n\r\n\r\n