In­dia mov­ing to­wards open bank­ing

Banking Frontiers - - Editor’s Blog -

There is lot of talk these days about open bank­ing. It has been there in the US and Europe and In­dia can­not afford to be not tak­ing no­tice. Un­der the Open Bank­ing Stan­dard, which is in fact a UK ini­tia­tive by the Open Bank­ing Work­ing Group (OBWG), banks can share users’ data in a se­cure man­ner through open APIs with third party apps, such as fin­tech com­pa­nies. So, open bank­ing en­vis­ages shar­ing of data so that cus­tomers, be it in­di­vid­u­als or busi­nesses, can more ef­fec­tively man­age their fi­nances. Open APIs would also al­low third party de­vel­op­ers to cre­ate help­ful ser­vices and tools that cus­tomers can uti­lize.

An im­por­tant step in ush­er­ing in open bank­ing was the leg­is­la­tion adopted by EU and the UK in Jan­uary 2018. The leg­is­la­tion em­pha­sizes that banks must share trans­ac­tion and cus­tomer data with au­tho­rized third party providers. And banks can do this through APIs.

Cur­rently, en­ter­prises, es­pe­cially the small and medium ones, though us­ing soft­ware for manag­ing their fi­nances, can­not in­cor­po­rate trans­ac­tion data in their books au­to­mat­i­cally and in real time. With APIs from their bank­ing ser­vice providers, it would be pos­si­ble for them to ac­cess all bank data in real time, ul­ti­mately giv­ing them more ac­cu­rate and up to date in­for­ma­tion on fi­nances. They will be able to com­pare and save on their ac­counts and have ac­cess to more per­son­al­ized re­sources for mak­ing bank­ing de­ci­sions. It may take years for this sys­tem to ma­ture and con­sol­i­date.

As far as the bank­ing sec­tor in In­dia is con­cerned, while there are sev­eral de­vel­op­ments - the chang­ing cus­tomer pat­terns, ad­vent of dig­i­tal tools, in­creas­ing use of tech­nolo­gies like dis­trib­uted ledger tech­nol­ogy - open bank­ing is still far away. But banks are keen to ex­per­i­ment and fine­tune the sys­tem. For a bank, data con­fi­den­tial­ity and se­cu­rity are supreme in or­der to have the trust of the cus­tomers. Bankers are con­cerned about the ef­fec­tive­ness of the In­dian data pro­tec­tion rules.

Re­cently, pri­vate bank DCB Bank has launched its open bank­ing plat­form to cre­ate a col­lab­o­ra­tive ecosys­tem with en­ter­prises, fin­techs and app de­vel­op­ers. Yes Bank was the first to launch APIs al­low­ing in­te­gra­tion with ERP sys­tems of cor­po­rate clients. RBL Bank has an API bank­ing ser­vices plat­form for use by en­ter­prises. Ko­tak Mahin­dra Bank has an API plat­form for lend­ing and pay­ment prod­ucts. A cou­ple of pub­lic sec­tor banks have also ini­ti­ated open bank­ing pro­cesses.

A sig­nif­i­cant re­lated de­vel­op­ment in this jour­ney to­wards open bank­ing in In­dia has been the neo-bank­ing plat­form Open, a first in In­dia. The idea is to fa­cil­i­tate SMEs to adopt dig­i­tal with Open be­com­ing an in­ter­face. It be­gan its op­er­a­tions in part­ner­ship with ICICI Bank and now 11 banks are its part­ners. With bankers now dis­cussing to open their APIs for fin­tech star­tups to build so­lu­tions around it, Open hopes there are op­por­tu­ni­ties for it.

Open bank­ing has def­i­nitely paved the way for a col­lab­o­ra­tive ecosys­tem be­tween banks, fin­techs and third-party providers to of­fer var­ied and per­son­al­ized fi­nan­cial ser­vices and a bet­ter grip on de­ci­sion mak­ing de­pend­ing on funds avail­able at a given point of time. As open bank­ing has dis­rupted the bank­ing ecosys­tem at the global level, it is just a mat­ter of time that the In­dian bank­ing sys­tem mi­grates to this plat­form fully.

N. Mo­han Mo­bile : 93228 95820 Email : mo­[email protected] bank­ingfron­tiers.com

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