How Open Banking and Banking APIs are Driving Fintech Growth in India

Government and private companies have teamed up to create a hybrid open banking system in India, unlike other countries

Representative image. Getty Images

Around the world, banking scenarios are changing and people are becoming more aware of ways to better manage their money. As a result of these innovations in banking, open banking and banking APIs are gaining a lot of attention due to the fact that they connect fintech to the banking industry. Thanks to technological advances, ordinary mortals can now access banks and their services directly at their fingertips.

So what exactly are Open Banking and banking APIs?

Open Banking is a term used for an online banking system that allows you to give consent to regulated third-party providers to securely access customer bank accounts. Banking APIs (Application Programmable Interfaces) are the medium that helps these third-party vendors access customers’ transition history, make payments on their behalf, help them obtain loans, and more.

Is it safe to share valuable customer data with third party companies?

Yes, it is absolutely safe and secure to allow access to third party companies as all shared data is encrypted. In addition, the customer decides to whom he wants to give access to the data and for how long. A user can deny access to any provider at any time.

In addition, these third-party providers associated with open banking are regulated and even have protective laws.

This unification of the technology and financial industry changes the whole experience for the end consumer. By opening up and sharing customer data with fintechs, banks help both customers and fintechs benefit from each other. The stored data can be useful in many ways, for example, the third-party company that has access to the customer’s transaction history can help customers get a better loan plan by helping them understand their financial status.

India Open Banking Scenario and How it Helps Boost Fintech Growth in India

The government and private companies have teamed up to create a hybrid open banking system in India, unlike other countries. The Reserve Bank of India has granted regulatory authority to a group of companies known as Account Aggregators (AAs). These companies have access to customer data and act as intermediaries.

A large number of private banks in India are collaborating with fintech companies to create alliances and work better to provide better and better services within this ecosystem. This is pushing fintech in India to grow.

The rapid growth of fintech in India has also given rise to many new financial services like mobile money and digital wallets which were very convenient to use as they were more economical and reliable. It has also led many people to open bank accounts to take advantage of these services and make banking more systematic.

UPI was also introduced in India in 2016. The National Payments Corporation of India has developed a real-time instant payment system, UPI, which stands for Unified Payments Interface. Paytm, Google Pay, PayPal and other companies have made money by allowing individuals to access their services. Millions of Indians use these services every day to make payments, pay bills and even purchase insurance. Indian fintech is booming thanks to UPI.

Moreover, Neobank is another widely used fintech term in India today. With the transition from the real world to the digital world, even banks are moving online. Neobanks are the future of banking. A Neobank is a digital bank that has no physical presence in the real world. They are app-based and have no physical location.

The futuristic new way of banking allows users to perform a wide range of banking activities online, from making payments to tracking money to managing their money. The growth of neobanks in recent years has attracted a lot of attention and helped to further grow the fintech scene in India.

In the near future, most things will be done online, and these technological innovations and advancements will be crucial for every business to grow and compete globally. Fintech is taking a big leap forward in India as the country moves into the new digital age.

The author is CEO and founder of Neofam, a neo-banking platform that strives to provide a solution for the average middle class. Views are personal.

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