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10 Reasons why your FinTech Needs the Transformative Power of Labs & Incubators

During the recent FinTech Happy Hour, hosted by Cedar-IBSi FinTech Lab and Cedar Capital, founders, investors, and CXO executives from FinTech, BankTech, and BFSI institutions, came together to exchange ideas, network, and collaborate on Everything FinTech!

One topic that echoed in the room was the importance of labs and incubators in India and the role they can play for FinTech companies.

In the rapidly changing FinTech landscape, the demand for guidance, mentorship, and strategic connections is essential. The Cedar-IBSi FinTech Lab is one such powerful catalyst driving these ideas towards unrivalled success since 2018 when it was set up in Dubai’s Internet City. The Lab not only cultivates invaluable mentorship but also forges highly lucrative connections within the FinTech industry.

Talking about the potential of labs and incubators, Geeta Chauhan, Co-founder, and CEO, HiWi noted, “Incubation and lab programs are particularly useful for startups with no experience or who are starting from scratch. FinTech(s) can take advantage of mentorship programs, a set of contacts and funding that ensure they get the right foot in the door.”

Here’s how labs and incubators are revolutionizing FinTech in India.10 Reasons why your FinTech Needs the Transformative Power of Labs & Incubators

  1. Mentorship and Guidance: Labs and incubators provide access to experienced mentors and industry experts who can offer valuable guidance and insights. This mentorship can help FinTech startups make informed decisions and navigate the complexities of the financial industry.
  2. Validation and Credibility: Being a part of an established incubator or accelerator program can add credibility to a FinTech startup. It validates the business idea and can make it easier to gain trust from potential partners, customers, and investors.
  3. Networking Opportunities: Accelerator programs like the Lab offer an extensive network of contacts in the FinTech and financial services sectors. Startups can connect with potential customers, partners, and investors, which is essential for growth and success in the FinTech industry.
  4. Product Development Support: Many FinTech startups need technical assistance and support for product development. Incubators, such as the Cedar-IBSi FinTech Lab can offer access to development teams, resources, and infrastructure to help in building and refining products.
  5. Market Research and Validation: Incubation programs often provide access to market research data and opportunities for market validation, enabling FinTech startups to fine-tune their offerings to meet customer needs.
  6. Fundraising Opportunities: Incubators and accelerators can introduce FinTech startups to potential investors, refine their pitch and business model, making them more attractive to investors. Many incubators and accelerators provide direct funding to early-stage startups in the form of grants, equity investments, or loans.
  7. Cost Savings: Shared office space, resources, and infrastructure can significantly reduce the operational costs for startups, allowing them to focus their financial resources on product development and growth.
  8. Skill Enhancement: These programs often offer training sessions and workshops that help FinTech entrepreneurs, and their teams enhance their skills in various areas, including marketing, sales, and leadership.
  9. Risk Mitigation: By providing a supportive ecosystem, labs and incubators can help FinTech startups identify and mitigate risks early in their development, improving their chances of long-term success.
  10. Market Entry Assistance: For FinTech startups, entering the Indian market can be challenging due to the diverse customer base and regulatory environment. Incubators can provide market entry strategies and assistance.

The Cedar-IBSi FinTech Lab is a dynamic entity propelling FinTech companies towards their target market. It has a proven track record in assisting 35+ FinTechs since 2018, offering market access and collaboration; product and market intelligence via the Cedar-IBSi Platform; visibility via exclusive in-house, global events, leadership interviews, coverage via the IBSi Podcasts and in the IBSi FinTech Journal; Acceleration and access to interesting co-investment opportunities via Cedar Capital.

For FinTechs in the Middle East & India, the Cedar-IBSi FinTech Lab is not just a place for mentorship: it’s a hub. A hub that fosters a culture of creativity, facilitating FinTech startups to think outside the box and develop groundbreaking solutions.

Labs & incubators are thus the perfect partners in your FinTech journey to realize the true power of transformation, innovation, growth, and limitless possibilities.

CategoriesAnalytics Banking as a Service (BaaS) IBSi Blogs IBSi Flagship Offerings

What’s the difference between BaaS and embedded banking? Quite a lot

The problem with a loosely defined term is that its meaning can become stretched. Anyone who has described a stadium-filling act such as Ed Sheeran as “indie” because he plays a guitar is guilty of this.

Banking-as-a-Service (BaaS) is just such a loosely defined term.

Some providers have stretched the term to encompass services such as Open Banking, card platforms, and APIs. This confusion is further exacerbated when aggressive marketing campaigns overlap BaaS with another fast-growing term: embedded banking. Using one term to describe all of these disparate services makes about as much sense as using the same word to describe a multi-platinum-selling artist and the band playing to three people in the local pub.

By John Salter, Chief Customer Officer at ClearBank

John Salter, Chief Customer Officer at ClearBank

 

Confusion over these terms is already widespread. According to Aite, a third of fintech providers do not believe there is any difference between embedded banking and BaaS.

There are, however, important differences between BaaS and embedded banking. Businesses need to understand the differences between these two concepts if they are to understand their own responsibilities, especially around governance and compliance, and what it could mean for scaling up or adding new features in the future.

Breaking it down: What’s the difference?

Despite its name, BaaS does not necessarily mean working directly with the holder of a banking license or that the services provided require a license. Instead, providers offer banking-related services and infrastructure, sometimes on behalf of a licensed bank, to firms including fintech startups, e-commerce platforms, and even other financial institutions.

BaaS is a “push” model. A banking product is created and offered “as a service” to a potential user. BaaS is the distribution of banking products to financial institutions and non-financial institutions. For example, non-bank players like Uber or Lyft work with a BaaS provider that is responsible for payments, cards, accounts, and loans. However, who is responsible for compliance and governance can vary between providers and use cases.

On the other hand, embedded banking is on the “pull” side. This simply means that financial services and products are embedded into financial or non-financial platforms, such as e-commerce and mobile banking applications. Embedded banking is the provision of a banking service directly from the holder of a banking license and embedded directly into the user experience. A typical example would be the Buy Now Pay Later (BNPL) functionality online shops have included at the point of purchase for customers to access installment payment options.

Do businesses need to understand the difference?

Should anyone care about this? This is a good question as most businesses won’t start with the question of whether they want BaaS or embedded banking. In fact, they’re unlikely to ask this question at all. Instead, they will have specific requirements for banking or banking-like services, and approach the right provider with those needs in mind.

So, who cares? Aren’t we simply over-analysing the technicalities?

It may seem so, but there are important implications for regulation and who is responsible for compliance.

BaaS providers may have a banking licence, or they may hold an EMI licence. Embedded banking providers are, by definition, holders of a banking licence. It’s important when entering into any agreement that the customer-facing business understands the regulatory nature of the agreement—who is responsible for compliance and KYC, how funds are safeguarded, and whether they are protected by a full banking licence. There is already concern from regulators around where consumers’ money is held and how safe it is—is there enough transparency? Knowing the difference is important, especially when the “gold standard” is when funds are held by a bank in an embedded solution.

Businesses aiming to enhance their offerings with financial services have the potential to create differentiated services that set them apart from the competition. But working with the right partner is crucial to success. When evaluating a partner, businesses must consider the range of services on offer, technology implications, compliance, security, and more.

So, a clear understanding of the differences between BaaS and embedded banking will make it easier for any business to decide what is right for them and their customers.

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