There was a time in Nigeria when you must go to the Bank to enjoy banking services. It was a time when the famous advert “tally number” trended. In an attempt to reduce the congestion in the banking hall, banking licence was liberalised, which gave rise to what was then called new-generation banks. Some of those new generation banks today occupy what we call FUGAZ, the top five banks in Nigeria comprising First Bank Plc, UBA Plc , GTBank Plc, Access Bank Plc and Zenith Bank Plc.
So in today’s world, you do not need to be a bank to deliver financial services. How? Many operators of financial service providers have moved the rendering of financial Services from the banking halls to the palm or desk of each customer through technology and innovation. It is common today for people to have access to loans, open savings accounts, invest, order debit cards, order a chequebook, pay bills, buy entertainment tickets or airline tickets etc.
A Fintech company identifies the financial friction it wants to fix and develops its platform to address it. For instance, to reduce the turnaround in obtaining loans, a Fintech may decide to establish a Loan App which can disburse loan requests in minutes, like the conventional model of waiting for days. Of course, the fact that the App grants the loan in minutes does not mean that the system skipped the credit conditions.
Now note that the Fintech Company does not have the borrower’s history, so it would have to establish a relationship with an existing bank where the borrower has a history. It then attaches its platform to that of the Bank to enable it to gain access to the information required to help the system adequately score the borrower. The company uses an Application Programming Interface popularly called API to carry out this handshake.