Can banks handle their own Banking as a Service?
Indian Fintech is big and has helped many an industry achieve low-cost profits and customer experience, and banking is among the top. Indian FinTech is a formidable force to be reckoned with, with the finance ministry saying that the market will reach about US$160 billion by 2025. According to a 2022 report by BLinc Invest, the Indian FinTech market is already the world's third largest.
But being a FinTech and being a bank are different things. Yes, India is big on FinTech. But where does Indian banking stand when it comes to controlling its Banking as a Service (BaaS)?
The Indian market has been evolving its BaaS business models with many banks having started these initiatives in the past 12-18 months. This has been fuelled by the Central Bank's push towards digitalization.
Today, banks are leveraging technology by providing BaaS, either outsourced or directly.
For example, in 2016, the State Bank of India partnered with Uber to provide vehicle finance to drivers. OPEN, a FinTech, uses ICICI Bank APIs to manage payments, billing, and accounting for startups. In 2018, Snapdeal and Freecharge tied up with Yes Bank to provide instant refunds. Last year, the State Bank of India initially partnered with Cashfree for payouts and cash withdrawals.
The concept of BaaS is not a new one in India. In fact, YesBank and RBL Bank have been leading the industry through the many APIs they offer to developers as early as 2013.
However, profitable as it is for banks to provide BaaS, outsourcing that service to third-party vendors is putting banks at risk of losing control of the narrative, says Riaz Syed, CEO of a FinTech 100 company, infinant.
“In outsourced BaaS, a bank works with a BaaS provider, in essence outsourcing the technology to
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