UPI, Open Networks to accelerate India's banking transformation: Study

India's shift from traditional banking to neobanking is driven by the Unified Payments Interface (UPI) and open networks, as per an ASSOCHAM-PwC study. Neobanks using embedded financial services have the potential to transform how Indians access financial services.

UPI, Open Networks to accelerate India's banking transformation: Study

Tuesday June 13, 2023,

4 min Read

India is poised for a transition from traditional banking to neobanking as it leverages the Unified Payments Interface (UPI) and open networks such as s Open Credit Enablement Network (OCEN) and Open Network for Digital Commerce (ONDC), according to a paper released by ASSOCHAM-PwC.

The rise of neobanking and embedded financial services (FS) represents a significant opportunity for India's banking and financial architecture to embrace technology and elevate user experiences, the study says. By leveraging UPI and open networks, neobanks have the potential to revolutionise how financial services are accessed and consumed in the country.

From pre-approved Buy Now Pay Later (BNPL) instruments, travel insurance at boarding pass printing kiosks, automated cashback routing for micro-investments, and seamless credit for medical expenses, embedded financial services provided by nonbanks are going to be vital tools for unlocking the next phase of growth for Indian banking.

The paper identifies two strategies for growth that financial services players are exploring: participatory embedding and proactive orchestration.

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Participatory embedding involves embedding FS within the customer journey or workflow controlled by partners. FS players design product offerings to adapt to real-time requirements based on available data. Interaction point coverage is crucial, requiring FS offerings to be embedded at high-volume and high-impact points. A dedicated ecosystem team, streamlined partner onboarding policies, and strong API tech capabilities facilitate smooth integrations.

Proactive orchestration involves FS players developing their own digital platforms that host both FS and non-FS services. These platforms curate a composite value proposition, attracting different customer ecosystems. FS is then embedded at various points where non-FS offerings are consumed.

This strategy offers unique benefits, including customer and data ownership, access to behavioural and transactional data, and the ability to provide a personalised concierge service with minimal back and forth. The platform approach allows flexibility in customising the offering by integrating different partners quickly. It expands use cases and interaction points, leading to customer acquisition gains and potential alternate revenue streams.

But what makes a good embedded financial offering? The paper provides a guide as to how an organisation can identify and embed financial offerings within customer journeys:


Understand the Context: Context is vital to creating successful embedded financial services (FS) offerings. It is crucial to understand the context in which they will be embedded. Consider factors such as the specific use case, the value or quantum involved, and the communication language preferred by the target audience.

Customisation is key: A customer-centric approach is essential when identifying embedded FS offerings. By curating customer journeys around their primary needs, organisations can offer personalised and tailored experiences. Segmenting customers into categories like value-conscious, savings-conscious, or service-conscious helps determine the type of products and experiences that will resonate with them the most.

Balance tech and personalisation: While technology plays a significant role in embedded FS, it's crucial not to overlook the importance of the human touch. By aligning the allied services of partners and FS players, organisations can deliver a seamless and consistent experience across channels. Combining digital convenience with personalised assistance ensures that customers receive the best of both worlds.

Leverage data analytics: Unlock Insights and Mitigate Risks Embedded FS offerings provide access to valuable data sets from partners. By leveraging integrated analytics, FS players can gain insights that allow for further customisation of product offerings. Additionally, data analytics can help identify and manage risks effectively, safeguarding both customers and the organisation.

Foster collaboration: The nature of embedded FS implies collaboration between partners and FS players. By implementing bidirectional ecosystem integration, organisations can create multiple entry points for customers. This collaborative approach maximises customer engagement and satisfaction while opening doors for further innovation and growth.

Edited by Affirunisa Kankudti