BANKING AS A SERVICE 102

Neobanks, Aggregators, Super Apps & More: Rebundled

Imagine a university offering various courses as traditional banking services. Each degree, such as bachelor of commerce, bachelor of arts, master of business administration, etc., is an unbundled banking service. Now, what has digital education done? Digital education categorized these courses and started offering specialized courses as re-bundled, repackaged innovative degrees.
So, you do not need to study the entire course curriculum in digital education; you can pick what you want to learn and specialize in the same field. The re-bundled services and products are similar to that offered online services, which are much simplified and faster than the traditional banking services and products.

FinTech companies, in our example, act as the medium of transmission of traditional banking services into re-bundled optimized banking products and services to ensure a flawless customer experience.
Take an example of payment options when you buy an item online. A customer who doesn’t have a credit/debit card can pay using net banking, UPI, m-wallet, cash on delivery, or he can even use Buy Now Pay Later (BNPL) service.

With the constant and rapid change in the transformation of the banking products, these companies are making an ecosystem of API banking where the fundamental structure of the financial institution will change from a products and services point of view. That’s where we need to re-bundle the banking services to offer an optimized modern banking product.

The Importance of Offering Re-bundled Banking Functions

Re-bundling of traditional banking systems is required to bridge the gap between what conventional banking offers and what customers expect. The traditional banking functions may be offering a wide range of banking services but might be lacking in providing a more significant customer experience. Moreover, the API-enabled technology has created umpteen opportunities to provide customized and customer-friendly products.

So, let’s see which are the key benefits of re-bundling the traditional banking services into modern banking functions:

New Revenue Sources

It will create new revenue streams for the financial services providers. For example, m-wallet, Buy Now Pay Later (BNPL) services have created new resources for the revenue for the financial services providers. Below are some monetization models these re-bundled banking functions can produce:

It will create new revenue streams for the financial services providers. For example, m-wallet, Buy Now Pay Later (BNPL) services have created new resources for the revenue for the financial services providers. Below are some monetization models these re-bundled banking functions can produce:

Revenue Sharing

Financial institutions and non-banking players (API users) can agree to work on a shared revenue business model to tie up with the API providers to offer a broad range of financial services and products.

Pay-for-use Monetisation

The pay-per-use business model focuses on per-use, per-transaction, or per-API call charges that will ensure the customers are charged for whatever services or products they use.

Subscription Model

The subscription model is one of the most common business models startups adopt these days. It offers customers a fixed subscription plan (monthly, quarterly, or annually) which allows them to use the product or service for a fixed period and the other subscription benefits.

One-time Charge

A one-time setup charge enables customers to pay only once and use the services for the rest of the period. Usually, such one-time charges are pretty high as the user is charged only once and will use the services and products for free for the rest of the period.

Freemium

Freemium allows you to use the financial service or product for free for a certain period. For example, free one-month trial or free limited use of APIs.

Data-based Monetisation

The data-based monetization model refers to monetizing the data that the organization has access to, which could be in a raw form or may be converted into analytics and charts. For example, banks already have customer data that they can share (confidentially and without tampering) with third-party financial services providers to optimize the user experience.

Easy Accessibility

Earlier, Small and Medium Enterprises (SMEs) and individuals could not secure financial assistance, and hence, they could not grow their businesses. Thanks to API technology, financial services, especially lending services, are now easily accessible.

Uninterrupted Customer Experience

Re-bundled banking functions are more user-friendly, self-explanatory, and offer a flawless banking experience that anybody can efficiently perform banking transactions. You can easily track your transaction history, saving a lot of your time searching and recording.

Bring Innovation

Modern banking products and services bring innovation and fresh approaches towards banking and payments while also optimizing the customer offerings by fundamentally transforming the financial value chain.

Transparency

Re-bundled banking functions are more transparent and clear in what they offer and how they work, thus fulfilling customer needs of transparency and confidentiality, all at the same time. But, which are these modern banking functions? What does a re-bundled banking function look like?
Let’s try to answer these questions by re-bundling the traditional banking functions into six broad modern banking functions.

Neobanks

The Neobanks, the digital-only banks, are the fruitful outcome of the non-bank fintech firms that offer banking services entirely online. From account opening to making deposits to lending money and offering credit/debit cards, the neobanks have paved the way for a complete digital transformation in the banking system. And all these services are provided for minimal (or sometimes zero) fees.

By 2026, these neobanks are expected to generate approximately USD 400 billion while also addressing the significant challenge of not having a physical branch. Let’s deep dive into these neobanks, how they work, their benefits and challenges, and how FinTech companies can leverage the new era of offering digital financial services and products.

How Does a Neobank Work?

Neobanks offer financial services to their customers on an online platform that does not have any physical presence. Since RBI does not permit such neobanks to operate as licensed banks, they rely on partnerships with various banks to offer financial services.

Neobanks offer financial services to their customers on an online platform that does not have any physical presence. Since RBI does not permit such neobanks to operate as licensed banks, they rely on partnerships with various banks to offer financial services.

In other words, it is an umbrella under which various financial services providers work together to provide a varied range of simplified financial services. They also generate marginal revenue from the difference in the rate at which the money comes in and the rate at which they lend it.
However, since they only have an online presence, their operating cost is relatively low, passing on to the customer by offering better services at cheaper rates. They are customer-centric, too, as they do not have a physical branch; they put more effort into resolving customer problems.

Benefits and Challenges for Neobanks

The preliminary aspect that goes negative against these banks is their online-only presence. However, the benefits are more prominent than the disadvantages.

The preliminary aspect that goes negative against these banks is their online-only presence. However, the benefits are more prominent than the disadvantages.

Benefits:

  • The services and products offered by the neobanks add sheer convenience to your banking experience.
  • By offering customized products such as micro-ticket size loans short-duration credit/loans, neobanks meet customers’ expectations to get aligned financial services.
  • The online-only neobanks provide a hassle-free account creation process that does not require you to print any id proof; you just have to upload them.
  • International payments are more comfortably possible with neobanks. For example, with Niyo’s debit card, you can make purchases or perform financial transactions abroad at the current exchange rates.
  • Neobanks are cost-effective as they offer financial services at relatively low costs. Their operational costs are less as they do not have a physical presence.
  • Neobanks provide every detail of your transaction for easy tracking so that you do not need to worry about recording it anywhere.
  • Apart from the regular consumer banking services, Neobanks also offer corporates a package of services to manage their payments and disbursals more efficiently.

Challenges

  • The neobanks have certain limitations in providing financial services, and hence, they do not offer certain services as the other licensed banks provide.
  • Not having any physical branch is one of the biggest challenges neobanks have as it impacts their customer relations in solving their queries.
  • Trust building also makes it difficult for the neobanks since they do not have a physical presence. Many customers would want a financial service provider to be available physically, which ultimately helps build their trust.
  • Since the RBI does not allow these banks to operate as licensed banks, this regulatory hurdle makes it difficult for customers to have any legal recourse when they have any queries.

How FinTechs are Creating an Impact via Neobanks?

The global FinTech funding jumped by 96% in 2021 compared to 2020, which remained almost at the same level as 2019, despite being an unprecedented year.

The global FinTech funding jumped by 96% in 2021 compared to 2020, which remained almost at the same level as 2019, despite being an unprecedented year.

FinTech companies have leveraged technological advancements to provide customer-centric financial services through neobanks. They have filled the gap for customer expectations of enhanced credit facilities, one-tap payment options, accessible financial products, and services that can be customized as per their needs.

As the neobanks serve the underserved, unbanked consumers, they are rapidly paving the way for the digital banking ecosystem where financial products and services are available to almost everyone as per their needs and all of it at a meager customer acquisition cost.
FinTech companies enabling digital payments, API-enabled card issuance, digital KYC, and ID proof verification services also contribute massively to such neobanks. While SMEs and MSMEs contribute significantly to the Indian economy, the neobanks are making it possible to continue growing due to their easy accessibility of products and services.

Often confused with digital banks, neobanks differ slightly from how digital banks work. While neobanks are online-only financial service providers that are not regulated as banks, digital banks are also online financial services providers regulated as banks.
It takes us to our following re-bundled FinTech product – Digital Banks! Let’s deep dive into the origin types of digital banks. Why you should/should not use digital banks.

Digital Banks

According to the Digital Banking Report by the financial brand©, digital banking transformation was the top priority for the banks in 2021. Digital banks are licensed banks to offer banking services and products on a digital platform. In India, a digital bank is a bank registered under the Banking Regulation Act, 1949 (The Act), which will issue deposits and provide lending services along with the entire suite of banking products and services allowed by the act. Such banks will rely predominantly on the internet to offer such services. Unlike neobanks, digital banks may have a physical branch apart from their online presence. Digital banks offer all traditional banking services and extended modern banking products and services to enhance customer experience. These banks use APIs, web-based solutions, and process automation to fulfill increasing customer demands of secure and smooth banking. You can access the digital banks 24×7 through the internet on your computers, mobile phones, and other compatible smart devices.

Digital banks can be of four types – nonbank, and challenger banks. Let’s see what each type of digital bank does.

Types of Digital Banks

Digital banks can be of four types – nonbank, and challenger banks. Let’s see what each type of digital bank does.

Digital banks can be of four types – nonbank, and challenger banks. Let’s see what each type of digital bank does.

Nonbank

Nonbanks are the non-bank players that offer financial services such as credit cards, credit facilities, mortgages, but they may not necessarily accept deposits. Some nonbanks obtain EMI licenses only to provide small and medium amount loans.

Challenger Bank

The challenger banks are budget-friendly and easy-to-use digital banks that challenge traditional banking services by offering banking services to underserved customers. The term became popular in the UK and referred to the recently launched small banks that compete with the big financial institutions.

Digital vs. Online vs. Mobile Banking

The terms digital, online and mobile banking are often used interchangeably, but each has its meaning and purpose. While digital bank refers to the banking services offered by a bank that may have a physical branch, online banking refers to the banking services provided by brick and mortar (physical) banks.

The terms digital, online and mobile banking are often used interchangeably, but each has its meaning and purpose. While digital bank refers to the banking services offered by a bank that may have a physical branch, online banking refers to the banking services provided by brick and mortar (physical) banks.

Similarly, mobile banking offers banking services through a mobile app. Mobile banking may not provide all the benefits that a digital bank may offer.

Advantages of Digital Banks

They have tapped the market that traditional banks could not. They offer easy financing to customers who cannot get them otherwise from the conventional banks. Let’s see how competitive these banks are for brick-and-mortar banks.

They have tapped the market that traditional banks could not. They offer easy financing to customers who cannot get them otherwise from the conventional banks. Let’s see how competitive these banks are for brick-and-mortar banks.

Easy Onboarding

The digital banks provide smooth customer onboarding to open a bank account online without visiting the branch.

Budget-friendly

Since they save a lot of capital by not having a physical branch, they offer services at quite a low cost. It is relatively cost-effective for customers who cannot afford traditional banking services.

Accurate Processes

Since digital banks work on an algorithm set for each transaction and service provided, they are free from human errors and accurately perform transactions.

Accessible 24/7

The most valuable part of digital banks is that they offer services anytime, anywhere. You can make payments receive money in your account without waiting for the banks to open.

Safety and Security

The digital banks are quite prepared about the cyber security and safety of each transaction performed digitally. Digital banks are leading the competition of data security over other conventional banks.

Agile and Flexible Services

The brick-and-mortar banks usually are too rigid on the eligibility for certain types of facilities, whereas digital banks are processed faster and are flexible on offering services.

Greater Usability

The user experience of digital banks is so seamless that the customers can perform the banking transactions effectively safely while also enjoying the banking experience.

Drawbacks of Digital Banks

Although digital banks are constantly working on providing secured transactions, they also carry certain risks, and they are not yet easily accessible due to certain regulatory restrictions. Below are some challenges of digital banks.

Although digital banks are constantly working on providing secured transactions, they also carry certain risks, and they are not yet easily accessible due to certain regulatory restrictions. Below are some challenges of digital banks.

Inherent Risk

Digital data is prone to hacking, and every piece of information on the internet can be hacked. Digital banks carry the inherent data risk of cyber theft.

Server Downtime

Digital banks may not always work fast or may not work if the server is down. Since it relies on the internet and the server, the server’s downtime may cost you billions.

Restrictive Regulations

In India, digital banks will be given banking licenses, but the RBI has not notified it. Moreover, certain digital banks may have licenses to offer restrictive services which may not meet the customer’s expectations.

Identity Theft

Since digital banks perform transactions online, it carries identity theft risk where details of a person’s identity may be leaked and misused for other personal gains. Data privacy may not always be practical.

Impersonal Banking

Digital banks do not require a physical branch to exist, and hence, it has a significant drawback of impersonal banking. Your banking transactions will be online, and you will not have a physical branch where you can pay a visit and ask your queries.
But, the customer’s queries can be resolved more efficiently without them visiting any branch. The new-age technology also provides chatbots that can help users ask questions, and with digital banking, it can be determined by just dialing one phone number.

Embedded Finance

In simple terms, embedded finance is a smooth integration of financial services and products with other financial service providers or non-financial services and products or technology. Embedded finance refers to attaching the financial services and the regular non-financial services, products, and technology in one place. For example, an e-commerce merchant selling fashion accessories also offers a small, instant credit facility on customers’ purchases from his platform without moving to any third-party webpage. In this example, fashion accessories are non-financial products, and offering instant small credit facilities integrates financial service with the non-financial product. Embedded finance has opened many revenue sources for FinTech companies; some of the use cases are given below to explain how massive these embedded finance products are.

Common Embedded Finance Products

Embedded finance has enabled many new revenue sources by allowing FinTechs to create modernized banking products and services that even a non-bank player can also integrate with its products or services.

Embedded finance has enabled many new revenue sources by allowing FinTechs to create modernized banking products and services that even a non-bank player can also integrate with its products or services.

PoS Lending

  • On-spot installment finance without moving to any third-party page.
  • Used for high-value purchases and repaid over a long duration
  • A small credit check is done
  • Interest is also charged on the amount lent

Buy Now Pay Later (BNPL)

  • Instant credit that allows repaying the amount in four installments
  • Used for smaller value purchase items
  • Does not charge interest if repayment is made on time

Trading and Investment

  • Integration of banks with the investment and trading service provider
  • Offers investment and trading experience that matched customers earnings and spending habits extracted from the banks
  • Can offer AI-enabled portfolio creation that works on a set of algorithms

Banking-as-a-Service (BaaS)

  • Banks’ integration with the third-party financial services providers
  • Offers a varied range of services from invoicing to the collection of payments
  • Small and medium businesses can save tremendous costs by availing BaaS

Integrated Insurance Products

  • Integration of insurance service provider with different merchants
  • Instant insurance service at the time of checkout from the merchant’s webpage

How is Embedded Finance Shaping FinTech Landscape?

Almost every organization enhances its customer base by offering/adding more products and services related to its existing product or service. For example, a merchant selling high-value items may enable embedded finance and integrate with the insurance provider to offer instant insurance service at the time of checking out from his webpage.

Almost every organization enhances its customer base by offering/adding more products and services related to its existing product or service. For example, a merchant selling high-value items may enable embedded finance and integrate with the insurance provider to offer instant insurance service at the time of checking out from his webpage.

Big Data will Make it Big

Big data is a large and complex data set that is hard to read or manage, and detailed analytics is required to interpret and create helpful information out of them. The use of big data will enable FinTechs to understand the market trend customer expectation that will ultimately help them create a customized service or product that will bridge the gap of customer expectation and offers by the existing players.

Diversified Products and Services

Diversification is the key to increasing business and customer reach. As more and more FinTech companies evolve, more products and services can now easily be integrated into the services and products you already offer.
For example, a car distribution company selling car insurance along with every new car purchase or a telecommunication app provides free learning courses on its app.

Growing Importance of Banking-as-a-Service (BaaS)

While in the Software-as-a-Service (SaaS) business, a software-making company would approach a bank to use its software to enhance their customers’ banking experience. While in BaaS, the banks integrate with the third-party service providers to offer the latest banking products and functions faster and easier than before.
Moreover, the development of the banking APIs has enabled new BaaS business models to cope with the increased customer expectations.

Gaining More Customer Trust

Consumers, especially GenZ, tend to use more FinTech products, and other age groups are also joining the race in massive numbers. The key contributor to the increased customer base is more trusted offerings and services, and the customers started trusting more of these FinTech products than their traditional sources.

Changing Customer Demands

The customers of this generation are more demanding; as technology advances, they want smoother, faster, and more accessible products and services without much effort. For example, a young group of people planning to watch a movie can book movie tickets and cabs, order food – everything from just one app.

Increased Use of Artificial Intelligence (AI)

The limitless benefits of AI have played a pivotal role, and it will continue to do so for the years to come in enhancing the customer base for an enterprise. AI helps analyze large data sets (big data) and convert them into more meaningful information and analysis that will indicate which embedded finance products an enterprise should use to increase customer reach.

Challenges for the Fintech Players

Although the opportunities in embedded finance for FinTech companies are vast and unimaginable, it also carries specific challenges that every FinTech player will have to address. The information provided below will help you understand the challenges and possibly manage them.

Although the opportunities in embedded finance for FinTech companies are vast and unimaginable, it also carries specific challenges that every FinTech player will have to address. The information provided below will help you understand the challenges and possibly manage them.

Competitiveness

More FinTech firms mean more competition, and more competition means better quality. However, every FinTech company will have to be conscious of its competitiveness to create a sustainable business model. Focusing on meeting customers’ expectations and constantly adapting to the latest trends could help them stand strong in the competition.

Technological Capabilities

The technology changes faster than its acceptance in organizations. As technology advances, FinTechs must use it to offer a better customer experience. Otherwise, the customers will quickly shift to those other service providers who adopt technologies faster to meet customers’ expectations. Faster adoption of the latest technologies can be the key to developing more customer-friendly products and services.

Data Security

Ensuring the safety of the data gathered will be crucial from the regulatory point of view and in building customers’ trust. Customers will automatically stop using your product or service if it is more prone to data leakage. A robust IT infrastructure with frequent security audits could solve the issue of data security and safety.

Super Apps

Super app refers to the combination of multiple services such as food, entertainment, grocery, fashion, cab, and financial services under one application in your mobile phone. For example, Paytm offers payments, cab booking, food ordering, shopping, short-term lending, entertainment, and many services just under one app. Gone are the days when you have to sift through various apps on your phone, remember passwords for each, and complete transactions separately in each application. Just as you get access to multiple stores in the shopping mall, including entertainment and food, the super apps work as a one-stop solution for your different requirements. The reason why super apps are gaining more popularity is that a large group of the population in India is well-equipped with smartphones and well-versed with technological advancements.

But, what makes a super app so super?

Characteristics of Super apps

To be considered a super app, you must have the certain services available in your app:

To be considered a super app, you must have the certain services available in your app:

  • E-Commerce Services allow you to shop online from medicines to clothes and high-value furniture. E-commerce services are at the heart of the super apps.
  • Social platforms can be there on the super apps to allow users to interact and build a community within the app.
  • Banking and payments are the most crucial feature of the super apps. The super app allows customers to make payments, send instant money, avail of instant credit facilities, make small deposits, and many other banking transactions within the app itself.
  • Ride-hailing services provided by the super apps enable their customers to move from one location to another with the availability of multiple transportation mediums such as car, auto-rikshaw, bike, etc.
  • Food delivery services have played a significant role in increasing the business for restaurants and eateries. A customer sitting in one part of the city can get the food home-delivered from the restaurant of his choice in any part of the city, thanks to these food delivery services.
  • Insurance Services are easily accessible and faster than the traditional method. Super apps and financial services also offer health insurance services to offer their customers a wide range of services.

How FinTechs and Financial Institutions can Collaborate Using Superapps?

The super apps can bridge the gap of enhanced customer demands and existing offerings by the traditional financial institutions by a super collaboration of FinTech companies and the financial institutions. But, how can these two collaborate? There are three enablers as discussed below that can make this collaboration fruitful:

The super apps can bridge the gap of enhanced customer demands and existing offerings by the traditional financial institutions by a super collaboration of FinTech companies and the financial institutions. But, how can these two collaborate? There are three enablers as discussed below that can make this collaboration fruitful:

APIs and Open Data

To enable the data flows, the use of APIs and open data is required by the financial institutions and FinTechs can be offering APIs and an analysis of the open data to create a rich data flow.

Partnerships

FinTechs and Financial Institutions may join hands and build a super app to offer comprehensive services in one app to enhance their customers’ experience.

Data Analytics

To be competitive, the financial institutions will have to understand how the customer data can be best used and build analytical capabilities using FinTech firms’ support.

Account Aggregators (AA)

The account aggregators do the simple task of compiling various accounts of customers such as bank accounts, business accounts, investment accounts, insurance accounts, and credit card accounts.

AAs collect, consolidate and share customer banking information (with their consent) using APIs in real-time in a data-blind manner with the financial institutions. The financial institutions then analyze the details gathered to understand customers’ profiles to offer better lending options and other banking services as a whole.

In India, the RBI governs the functions of the AA to safely share your financial and other confidential details to the financial information user in the AA network without having to worry about the data being tampered with.

How does Account Aggregator Work?

Before we jump on to an illustrative scenario, let us first understand the critical components of the AA process.

Key Players in the Account Aggregation Process

The AA procedure consists of three key players:

  • Financial Information User (FIU)
  • Financial Information Provider (FIP)
  • Account Aggregator (AA)
Financial Information User (FIU)

The user of the financial information means the financial institutions from where the customers want to avail of the financial services.

Financial Information Provider (FIP)

The financial information provider means any bank, mutual fund or insurance company, Non-Banking Financial Company (NBFC), or other financial institution holding customers’ details.

Account Aggregator (AA)

The account aggregator will play a role of a middleman who will obtain data from FIPs using APIs and pass the details to the FIUs. Now, let’s take an example of a customer who wants a car loan from the financial institute (in our model, the FIU).

  • The customer will create his account on the AA website and link all his bank accounts.
  • When a customer approaches the FIU to obtain a car loan, the FIU will ask the AA to provide information about the customer.
  • The AA will then use an API-based application to gather customer’s information after he consents to access which data the AA will use from the FIPs and to which entities AA will disclose his data in a tamper-proof manner.
  • The FIPs will give access to customer data. The FIP will then collect it through AA and analyze the data to understand the customer’s creditworthiness and offer a customized car loan that will suit the most to the customer.

Opportunities for FinTech Companies

The core purpose of having AAs in the banking system is to have a secure way of data sharing to offer a hassle-free user experience while ensuring easy accessibility of certain banking services to all, including small businesses. The opportunities that the AA framework brings in the open banking ecosystem focus on the four major segments:

Lending Services

The AAs will be disrupting the traditional lending market by allowing every individual and small and medium-size business to avail of short-term credits of small amounts. For some individuals with no credit history, borrowing had been a significant obstacle in obtaining short-term finance. The AAs will bring parity in the lending and borrowing system by size and duration of the borrowing.

Wealth Management

The wealth management service providers such as brokers and mutual funds will be better positioned to offer quick solutions for personal wealth management strategies as customers’ real-time details can be accessed through the AA platform.

Insurance

The AAs will be the crucial information providers for the insurers as they will have access to customers’ spending patterns, their healthcare details, and other premium responsibilities. It will help them curate the insurance policy suitable to their needs and spending behavior.

Direct and Indirect Tax Filing

The bank statement is a pivotal statement to filing income tax or GST returns. The introduction of the AA framework will automatically allow direct and indirect tax portals to fetch bank statement details, which will reduce a lot of time in the preparation, collection, and verification of taxpayers’ details.

Issues in Building a Robust AA Ecosystem

Alright, we talked about everything positive about the AAs. Still, there are challenges that we need to address, issues that should not be overlooked, and concerns that are already being discussed by the concerned authorities. So, what are they?

Safety and Security

The security of the shared data is the biggest concern since AA was being considered in 2016. Although the data transmission occurs safely without the users’ data being tampered with, there lie some inherent risks for every piece of information shared online. The cyber frauds and anti-money laundering issues are yet to be addressed as a detailed Standard Operating Procedure (SOP) are awaited.

Data Privacy

Since the data is shared among various FIUs, the issues related to data privacy need to be addressed well before its misuse. The concept of electronic consent is therefore brought to ensure the data is accessed and shared only once the customer approves it to be shared.

IT Infrastructure

Without a robust IT infrastructure, the existence of AAs will be a question. The overall IT infrastructure will ensure smooth API implementations, audit of licenses, privacy frameworks, and other IT designing requirements are built carefully.

Customer Willingness

The success of the AA framework will be decided as more and more users start accepting it positively. The issue of customers’ resistance to adopting such a system is also one of the significant concerns.

API Aggregators

Open banking has API aggregators in the center of it. The API aggregators are the API of the different APIs. It is essential to know that two APIs can never be the same as each API is unique and has its own standard usability. Irrespective of what BaaS product you want to create, the API aggregators offer a standard and unique API that will ease your integration with banks and other financial institutions.

For example, Cashfree Payments has built a single platform of multiple open, and partnership APIs that will allow you to integrate with other banks to build your banking products or services.

How does Account Aggregator Work?

Before we jump on to an illustrative scenario, let us first understand the critical components of the AA process.

What Does an API Aggregator Do?

  • They provide aggregation services under a single platform that connects multiple APIs and helps you reduce your workload to keep individual connections with the banks or third-party service providers (TPPs).
  • API aggregators act as an agent between the banks and the BaaS players or TPPs building BaaS products and services.
  • You can create your product or service by picking an API aggregator’s unique API that will connect you with multiple stakeholders you will need to integrate with during the process of product development.
  • Small banks can expand their reach to the TPPs to build a community of partners and collaborators.

Thus, banks need API aggregators since they are well-connected with the developers and know what they need. Similarly, developers will also require API aggregators as they are in the center of open banking without which their product development could be incomplete.

So, that takes us to the end of the re-bundling banking products into the latest banking functions. Although there might be new additions year after year, these products will remain at the core of modern banking functions.
In the next module, we will be discussing various stakeholders you will come across while building your BaaS product.
Till then, Happy Banking!

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