Banks have historically struggled with integrating their systems and data. Legacy systems, data silos, regulatory hurdles and the complexity of integrations continue to challenge financial institutions. And understandably so - as the number of systems we’ve grown to rely on continues to increase, they’ll fail to save us time and energy if they’re unable to communicate and work together. However, this was arguably the secret to Slack’s success - its capability to connect with many other tools and services. Slack's API and bots allow it to connect with many different tools and services, making it popular among businesses of all sizes.

What is integration? 

At its heart, integration is simply an exchange of data between two systems. Despite the hyper-digitisation the world has gone through, a large part of lending still needs to be digitised. And integrations with the right technology and systems, have the potential to remove the redundancies in manual tasks by allowing data to flow freely between systems, providing a single interface for documenting progress.  

In this blog, we’re specifically talking about API integrations. API integration is becoming more common in lending as it allows for real-time data transfer and automation and provides flexibility. With API integrations, systems can communicate with one another in real-time, share data, and automate processes. This ultimately improves the end-user experience and makes the lending product reliable, scalable and partnerships-ready. 

Integrations can be simple or as complex as necessary, so long as the technology platforms you’re communicating with allow for data exchange. An API-integration strategy helps lenders see the data exchange process happen without any hiccups, improving the customer experience, and providing more opportunities to innovate. However, most lenders’ concerns are centred around how data is shared for privacy, data integrity, or other concerns. For reference, if you’ve ever used Microsoft Outlook exclusively because of email privacy concerns, you know what we’re talking about.

What are some API integration challenges encountered by lenders? 

1. Some may not be comfortable calling a CBS (Core Banking System) API from an external cloud - this means the process of accessing a CBS's API (Application Programming Interface) from an external cloud-based system or application. This allows external systems or applications, such as mobile banking apps, online portals or fintech startups, to retrieve and manipulate data from the CBS, such as customer account information, transaction history, and other banking-related data.

2. There is a decision-maker around every step, which makes triggering an API call by an external/third-party company almost impossible. For example, a bank doesn’t allow automated fund transfers without the bank’s central team's approval. Usually, having a business rule engine in place solves this problem 

3. Some lenders may want to manage all their databases within the bank’s network 

4. Some lenders may want an added layer of encryption on top of their API calls - which can add to the complexity, challenge scalability and add latency to the process. 

What are the types of integrations required? 

Lender integration can be broadly viewed as 2 systems.

1. LOS - Journey onboarding steps 2. LMS - Managing an active loan (Repayments and penal charges)

There’s a laundry list of integrations that connects the entire lending process, these integrations are run on the back of APIs. Just as a bridge connects two land masses and enables the exchange of goods and people, an API connects two software systems and enables the exchange of data and functionality.

• If a blacklisted customer has applied for a loan 

• Dedupe API which confirms if the borrower already exists in the lender’s system 

• An API to collate all the documents

• An API to collect credit score

• An API for loan booking, repayment, refund, payment gateway integration, and loan summary

Apart from this, integration layers also need to ensure workflows for KYC, NACH set-up, E-sign and Terms and conditions. 

Here’s a more detailed description of every integration required 

1. NCIF API

   1. This API is used to filter out blacklisted users based on banks’ credit policies. Typically used by Banks, not NBFCs, for NBFC there is PAN-based filtering done.

1. BRE

   1. Policies are defined by the Lenders, NBFCs, or Partners for the applicability of loan applications. These policies can be created in the BRE through APIs.

   2. The BRE API can then use inputs from the user to decide the candidature of the Loan Applicant.

2. BCIF Dedupe

   1. Only applicable to banks where they will check if a lead exists in their system based on PAN, Email, mobile, etc

   2. This API ascertains if the customer is an ETB (existing to bank)  or NTB (new to bank) customer.

3. LOS / Lead creation

   1. This is called to create an entry into lenders’ LOS system.

   2. For banks we call this API either after a user is qualified for a loan or after KYC is completed based on the request structure of this API. Most of the time it's called after the BRE qualifies a customer.

   3. For NBFCs, it's typically called MITC to push all data together.

   4. A Lead number/customer identifier is generated by the lenders, and update the Loan Application Number with the ID that is passed by the lender.

4. KYC

   1. NBFCs can be accommodated with one of our existing flows for KYC. [EKYC, OKYC, Digilocker etc]

   2. Banks usually have their own KYC journey built into their environment. We will open the banks’ KYC link.

   3. For ETB customers, fresh KYC is usually skipped and existing KYC details are fetched.

5. Document upload

   1. This API will be used to push all documents collected in the journey. Typically used by NBFCs and banks where the KYC is remotely deployed. 

6. CIBIL Hardpull

   1. This is a mandatory API that is common to both NBFCs and Banks. This needs to be called before MITC.

7. Additional scoring API

   1. This is a specific API for some banks. In case they have their own scoring mechanism we might have to integrate this. It takes the CIBIL bureau response and generates a score for a user.

8. NACH

   1. NBFCs can use existing e-Nach flows offered by FinBox through its journeys to complete the set-up of auto-debit. DIGIO nach flow with their lender name configured in the journey

   2. Banks can do the same if they don’t have their own e-NACH flow.

9. E-sign

   1.  For Aadhaar-verified e-signing, the lenders can simply call our APIs that come pre-integrated with registered e-sign providers. 

10. MITC - Most Important Terms and Conditions

    1. During UAT integration lenders will share their agreement template. We need to create a template that can be filled with applicants’ data.

    2. Once a template is created we assign it to a lender.

Post Sanction (LMS)

1. Create Loan / Disburse

   1. API to create a loan booking at the lender's end. This will give a loan ID that needs to be tracked for further API calls.

2. Loan Summary

   1. API to give details on an active loan. We use this API before triggering Repayments or nudging users for repayment.

   2. This will give information regarding penal charges

3. Mark Repayment

   1. This API will mark an EMI payment. This is usually called after success from the payment gateway.

   2. After successful repayment, we need to verify if the amount is updated by calling the loan summary API

4. Refund API / Foreclosure

   1. This is an API to close an active loan before its tenure. This API is called by the platform in case they want to handle a refund scenario (specific to credit line / OD)

5. Payment gateway integration

   1. Banks might have some specific payment gateway integration tie up. We need to incorporate that in our journey.  

Conclusion 

No doubt that the world we live in has become highly volatile, fast-paced and almost fickle in terms of consumer behaviour. The number of variables to consider, not just for lenders, is evolving at the rate of knots.  And lenders are catching up -  in tandem with changing customer expectations, financial institutions are delivering better experiences. And it is exactly this conundrum, the one around serving your customer with the best banking experience, that has brought APIs to the centre of the lending ecosystem. APIs in lending promise to create and deliver better, instant solutions to a hurried customer. They also serve as a facilitator for finding personalized solutions, while generating bundles of user-generated data for the businesses to decode and leverage. 

What most lenders overlook is that integration isn’t a one-time solution, it’s continuous maintenance and therefore resource intensive. We understand that APIs are a mainstay in the financial services industry, which is no wonder because we’ve built a business around it! We’ve helped several lenders focus on their core strengths, while we take care of maintaining data connections and increasingly complex workflows between interfaces. As a digital infrastructure company, FinBox knows its nuts and bolts. So, if you’d like, we’re here to walk you through integrations. 

Get in touch with us today!