Venu Appana from Global Fintech Finastra Shares Perspective on the Current State of BNPL and Embedded Lending Ecosystem

We recently connected with Venu Appana from global Fintech Finastra, who helped us learn more about embedded lending services.

Venu talked about the various concerns about BNPL products. He also helped us gain a better understanding of the overall Fintech industry trends and the current state of adoption of pay over-time products.

It’s worth noting that Finastra’s purpose is to unlock the power of finance for everyone.

A global provider of financial software applications and marketplaces, Finastra also launched the open platform for innovation,, in 2017.

They serve institutions of all sizes, providing software solutions and services across Lending, Payments, Treasury & Capital Markets, and Universal Banking (Retail, Digital, and Commercial Banking) for banks to support direct banking relationships and grow through indirect channels, such as embedded finance and Banking as a Service.

Our conversation with Venu Appana is shared below.

Crowdfund Insider: Could you please give us a brief introduction?

Venu Appana: With over 20 years of experience spanning financial services, and the technology sector, I am a product professional passionate about creating impactful digital solutions that enhance customer value and drive business growth. I am focused on delivering successful products and platforms in areas such as point of sale, consumer lending, innovation, and emerging payments.

Currently, as the Lead Client Partner for Banking as a Service (BaaS) at Finastra, I leverage my strategic and commercial expertise, user experience and product design skills, and data analytics experience to develop and execute BaaS strategies and roadmaps for key solutions.

I work with senior stakeholders across Finastra’s business and technology functions to identify and capitalize on new opportunities, solve complex problems, and deliver exceptional results.

Additionally, I mentor product and design teams, fostering a culture of collaboration, innovation, and customer-centricity.

Crowdfund Insider: Why have there been concerns around BNPL offerings?

Venu Appana: Concerns around BNPL offerings stem from issues such as a lack of transparency in fee structures. The language used usually isn’t clear, specifically on how much is being charged to support each installment, and the various plans available.

In comparison, with legacy payments such as credit cards, customers aren’t aware of residuals such as interest because payments can be extended over several years. Based on regulations, users can see a new box was added on credit card statements where the financial institution demonstrates if the customer was to pay over ‘X’ amount of time.

Crowdfund Insider: What are the main differences between Embedded Lending (EL) and BNPL?

Venu Appana: Embedded Lending (EL) and Buy Now, Pay Later (BNPL) differ in their approach to consumer credit, primarily in terms of integration, flexibility, and application scope. EL is seamlessly integrated within products or services, enhancing the user experience by providing customer ownership. In most cases, BNPL loans are owned by the intermediaries, while in EL, the loan is onboarded by the FI system. FIs can cross-sell other bank products to these customers and the cost of acquisition is lower than other means.

Embedded Lending (EL) and Buy Now, Pay Later (BNPL) differ in their approach to consumer credit Click to Tweet

Additionally, the average size of EL transactions make it a better fit for FIs as they fall in the regular lending flows and regulations (i.e.: larger ticket sizes). Different models exist based on the level of sophistication that an FI needs. At Finastra, we work with several banks and other partners to seed the ecosystem and connect the right partners both from a strategic and operational/tech stack perspective. This allows FIs to opportunistically deploy hard-earned deposits efficiently.

Crowdfund Insider: Why is it important to differentiate between the two?

Venu Appana: Differentiating between EL and BNPL is crucial as it clarifies their distinct roles within the financial ecosystem, especially in relation to BaaS. EL, when integrated with BaaS, allows for financial services that extend beyond simple transactions at point of sale, like BNPL.

This integration enhances consumer experiences and product effectiveness. Moreover, the flexibility of BaaS in risk management complements EL’s personalized approach, enabling banks to offer varied lending products that meet diverse consumer needs and risk profiles, creating a more versatile financial ecosystem.

Crowdfund Insider: Could you define BaaS and explain its role in today’s financial ecosystem?

Venu Appana: We published our State of the Nation Survey, which reinforced the overall appetite that exists for BaaS. They have grown in significance over the last year, with financial services organizations adopting them in far higher numbers. BaaS deployment has jumped globally by 37% year-on-year.

These findings help reinforce a trend we’ve seen bubbling to the surface for the last few years; data from Finastra’s 2022 BaaS survey, demonstrated this space has an estimated $7 trillion market opportunity. BaaS is a model that allows digital banks and other third-party companies to connect with banks’ systems directly via APIs so they can build banking services on top of the providers’ regulated infrastructure. This enables non-bank businesses to offer banking services such as payments, debit and credit card issuance, lending, and more, without having to become banks themselves.

Crowdfund Insider: How is BaaS transforming traditional banking models?

Venu Appana: BaaS cannot be ignored. It’s transforming traditional banking models by providing services through an Open API system, expanding the banks’ ability to adopt new solutions, resulting in more revenue and opportunistic growth. The trend towards BaaS is driven by consumers seeking financial products with features such as lower fees, better user experience, and speed.

Crowdfund Insider: In what ways does open finance support EL offerings?

Venu Appana: ​​Through our research and ongoing discussions with business partners, we are identifying new use cases and business models. Embedded lending enables partners to support innovative scenarios where the lender can secure the loan.

Finastra orchestrates the entire end-to-end process, accommodating additional requirements for secured lending opportunities. This includes enhanced onboarding protocols and new workflows that incorporate additional documentation for customers to e-sign, submit, and onboard new loans into backend CORE systems.

Crowdfund Insider: Can you explain how BaaS platforms enable more flexible and personalized EL solutions compared to BNPL?

Venu Appana: BaaS platforms enable more flexible and personalized Embedded Lending (EL) solutions compared to BNPL by integrating lending opportunities directly within the banks’ existing frameworks. This seamless integration allows banks to manage and tailor lending solutions to specific customer segments and use cases more effectively. Finastra, acting as an orchestrator, collaborates with banks and embedders to create new business models and customized lending scenarios, including secured lending options.

This flexibility is crucial for banks to deploy their deposits strategically, especially in environments with high funding costs, allowing them to offer more personalized and responsive financial solutions than the relatively rigid and generalized BNPL offerings.

Crowdfund Insider: How does EL integrate within products or services to enhance consumer experience differently from BNPL?

Venu Appana: EL experience is tailored to the bank’s specific requirements, unlike BNPL, where the experience is managed by intermediaries. EL supports in-store and eCommerce transactions, for new business use cases where customers seek financing for large purchases, such as secured home improvement loans. Finastra has developed custom technology to meet banks’ needs, including the integration of the bank’s credit engine and other proprietary systems.

Crowdfund Insider: How does open finance complement EL in expanding opportunities within the regulated banking infrastructure?

Venu Appana: BaaS, alongside EL, allows for increased speed and service. BaaS complements EL by offering a collaborative model that enhances customer experiences, streamlines financial transactions, and fosters innovation through partnerships between traditional banks and fintech companies.

This collaboration accelerates time-to-market for new financial products and services, reduces development costs, and ensures regulatory compliance.

Crowdfund Insider: What risks do participating banks face with BaaS, and how do they control these risks?

Venu Appana: Banks engaging in BaaS face several risks, including compliance and regulatory, operational, and counterparty risks.

To manage these risks, banks should employ several strategies: thorough vetting and monitoring of BaaS partners, establishing clear contractual agreements with detailed roles and compliance requirements, and maintaining robust cybersecurity protocols. Additionally, integrating risk management systems and limiting exposure by controlling the scope and scale of services can help manage operational and credit risks.

By implementing these measures, banks can safeguard their interests while leveraging the advantages of BaaS to expand their service offerings and reach new customer segments.

Crowdfund Insider: What future applications do you see for BaaS in expanding EL opportunities?

Venu Appana: Banks have been lending to customers for as long as I can remember. It’s their core competency. We see new business and use cases where banks are able to support new customer experiences, address new growth opportunities, reduce risk as in the case of secured lending, and share risk with other players in the ecosystem, thereby reducing loss rates and building/outsourcing the technology stack to keep  implementation costs low.

This has clearly helped banks to test and learn, for example, having the flexibility of a fintech. Embedded lending is within their comfort zone and can bring in incremental high-quality and healthy revenue streams in the long run.

Venu Appana from global Fintech Finastra discusses #BNPL and embedded lending #Fintech Click to Tweet

Sponsored Links by DQ Promote



Send this to a friend