The government and private companies have teamed up to create a hybrid open banking system in India, unlike in other countries
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Across the globe, banking scenarios are changing, and people are becoming more aware of ways to better manage their money. As a result of these innovations in the banking industry, open banking and banking APIs are gaining a lot of attention due to the fact that they are linking fintech to the banking sector. Thanks to technological advancements, the common person can now access banks and their services directly from the tip of their fingers.
So, what exactly are Open Banking and Bank 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 customers’ bank accounts. Bank APIs (Application programmable interfaces) are the medium that helps these third-party providers to access customers’ transition history, to make payments on their behalf, to help them get loans, etc.
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 data that’s shared is encrypted. Also, the customer decides who they want to give access to the data and for how long. A user can deny access to any provider at any time.
Furthermore, these third-party providers associated with open banking are regulated and even have protection laws.
This unification of the tech and financial industry tweaks the whole experience for the end consumer. By opening and sharing customer data with fintechs, banks help both customers and fintechs to benefit from each other. The data that’s stored can be useful in many ways, for example, the third-party company which is given access to the customer’s transaction history can help the customers get a better loan plan by helping them understand their financial condition.
Open Banking Scenario in India and how it is helping boost fintech growth in India
The government and private companies have teamed up to create a hybrid open banking system in India, unlike in other countries. Reserve Bank of India has granted regulatory authority to a group of companies known as account aggregators (AAs). These companies get access to customer data and act as middlemen.
A large number of private banks in India are collaborating with fintech companies to create alliances and work better to provide better and more quality services as part of this ecosystem. This is driving fintech in India to grow.
The rapid growth of fintech in India also resulted in many new financial services like mobile money and digital wallets, which were very convenient for people to use, as they were more economical and reliable. It also led to many people opening 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 an instant real-time payment system, UPI, which stands for Unified Payments Interface. Paytm, Google Pay, PayPal and other companies have made money by giving individuals access to their services. Millions of Indians use these services every day to make payments, pay bills, and even get insurance. Indian fintech is booming thanks to UPI.
Additionally, Neobank is another fintech term widely used in India today. With the transition from the real world to the digital world, even the banks are moving online. Neobanks are the future of the banking sector. A Neobank is a digital bank that does not have a physical presence in the real world. They are app-based and have no physical location.
The new futuristic way of banking allows users to perform a broad range of banking activities online, from making payments to tracking money to managing their money. The growth of neobanks in recent years has attracted quite a bit of attention and helped continue the growth of 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 company to grow and compete globally. Fintech is taking a huge step forward in India as the country moves towards the new digital era.
The author is CEO and Founder of Neofam, a neobanking platform striving to provide a solution to the average middle class. Views are personal.
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