Fintech partnerships with small finance banks (SFBs) typically work on a “shared strengths” model: the SFB provides the regulated balance sheet and licenses, while the fintech brings UX, technology, data, and distribution. These alliances run across deposits (digital FDs, savings), lending (co‑lending, digital credit), and embedded banking via APIs and SDKs.
Basic partnership structure
- The SFB remains the regulated entity that actually holds deposits or books loans, complying with RBI norms on KYC, capital, asset quality and reporting.
- The fintech acts as a front‑end or “layer” on top: onboarding customers digitally, offering comparison or advisory, and integrating bank products into its app or partner apps using APIs and white‑label solutions.
- Commercials usually involve revenue‑sharing (commissions, fee splits) or technology‑licensing, with clear contracts covering data sharing, responsibilities and compliance.
Example: digital FDs and liability products
A common model is digital fixed deposits: a fintech (or B2B infra provider) builds an FD marketplace or FD module and plugs it into multiple SFBs. In one publicised tie‑up, Suryoday Small Finance Bank partnered with Tarrakki to offer fully digital FDs using SDKs and white‑label apps, letting the bank onboard customers quickly via mobile and web while Tarrakki provides the tech stack.
From a user’s view, they pick an FD inside the fintech app; in the background, KYC and funding flow through APIs to the SFB, which actually opens and maintains the FD. This helps SFBs grow low‑cost deposits beyond their physical catchment area, and helps fintechs offer higher‑yield SFB FDs alongside other products in one place.
Example: digital lending and co‑lending
On the lending side, fintechs source customers, run digital underwriting using alternative and bureau data, and present loan offers that are funded partly or fully by an SFB. RBI’s digital‑lending and First Default Loss Guarantee (FDLG) guidelines now allow structured risk‑sharing between regulated lenders and fintech‑type Lending Service Providers, under strict caps and disclosure rules.
SFBs benefit from data‑driven access to MSMEs and retail borrowers they might not reach directly, while fintechs avoid holding full credit risk or needing a banking licence. All disbursals and repayments, however, must flow via the regulated entity’s accounts, with the customer clearly told that the SFB is the actual lender.
Technology rails: APIs, SDKs and open banking
These partnerships are enabled by open‑banking style infrastructure: secure APIs, SDKs, and low‑code/white‑label modules. API platforms and B2B fintechs provide “banking rails” that let SFBs expose services like account opening, deposit creation, balance checks, and loan origination to third‑party apps while handling consent, security and audit trails.
For SFBs, this dramatically reduces time‑to‑market for new digital products and lets them tap multiple distribution partners instead of building everything in‑house. For fintechs, it means they can embed SFB products inside neo‑banking interfaces, wealth apps, or merchant platforms while staying compliant with RBI’s data‑sharing and digital‑lending norms.
Regulatory guardrails and risk sharing
RBI has tightened guardrails so that customers always know which regulated entity they are dealing with and who bears credit and deposit risk. Key principles include:
- Clear disclosure that the SFB (not the fintech) is the lender or deposit‑taker.
- Limits and conditions on FDLG or first‑loss guarantees from fintechs to banks.
- Strong norms on digital KYC, consented data‑sharing and grievance redressal.
When designed within these rules, fintech–SFB partnerships can scale inclusion: SFBs get cost‑effective digital reach; fintechs get reliable regulated partners; and customers get better rates and smoother journeys without compromising legal protections.