Partners Ka Bank. That’s how RBL or Ratnakar Bank Ltd advertised itself on the front page of The Economic Times, last week. It called itself a great bank to partner with while pitching itself to the many fintech founders who seek a banking partner.
A bank advertising to attract startups as partners? Now that’s new.
When one speaks to RBL’s executive director and head of strategy, Rajeev Ahuja, about it, one realises this is all part of a larger plan. One where Ahuja says that RBL wants to be the Amazon Web Services (AWS) of financial services in three years.
One would have heard many times over that startups want to be like Amazon, Uber and Facebook. But when a bank that says it wants to be like Amazon’s cloud computing business—AWS—it’s downright unusual.
Unusual because AWS is everything that banks are not.
AWS sells infrastructure it owns as a service to companies. Companies buy the computing and storage capacity to build innovative products and businesses. That makes AWS an efficient behind-the-scenes facilitator.
However, banks, that we know of, don’t like being behind the scenes. They like to build products for their consumers, own them and stay in control.
For banks to really be like AWS, they would need to expose their core infrastructure—that’s their licenses and the core banking software that power all banking capabilities. Other companies can then draw from it and build their own businesses. But this would make banks a platform.
And it’s not just Ahuja, who says this. His counterpart at Yes Bank Ltd, Ritesh Pai, the country head of digital banking, too, brings up the same analogy to describe what the bank is doing. So one wonders if they are onto something.
Onto something that big banks are usually averse to.
BaaS is not for everyone
At the Nasscom summit in February, HDFC Bank’s chief Aditya Puri had many things to say. While the ‘wallets have no future’ quote got the most attention, he also said this: “When you look at Apple Pay, Paytm or loan.com, all of these are going to ride on the basic system of a bank. They wanted to move to a world where the bank is a financial service provider, like software as a service,” he says with a slight sneer. “Unfortunately, I don’t want that.”
What Puri probably doesn’t want to entertain is the thought of creating a range of Application Programming Interfaces, or APIs, for some other company’s use. Think of APIs like a plug point. If a bank creates enough plug points in its circuitry, a company (with the bank’s consent) can plug into them. And it could then use the bank’s tech infrastructure and regulatory cover to create a brand new product.