Open Banking – Emerging Banking 2.0 in India.

Last Updated on July 26, 2023

open banking, open banking in India, open banking api


Open banking in India is in a very nascent stage. It is because the Indian banking system focuses more on security and privacy. Think of open banking as the digital variant of your traditional banks, except open banking has much more to offer when compared to traditional banking institutions. The Open Banking system is used widely around the globe by Monzo in UK, Xinja in Australia, and N26 in Europe as some of the best examples.

Table of Contents

What is Open Banking?

Open banking system sits on top of the traditional banking system using an application programming interface (API). It let third-party developers and fintech build applications and services, including those that provide real-time payments, greater financial transparency options for account holders, marketing and cross-selling opportunities, so that you are connected with your traditional banking system but in a more streamlined and digital manner. It also prepares you for the future, where the neo-banking concept would be used daily. For example, imagine getting the loan approval, and KYC process done in seconds through your phone, with your verified data already available with the banks. If this sounds good, then welcome to the future of banking and financial services.

Whenever you want to open a new bank account, you have to go through the same tedious process of doing your KYC every time. In addition, when you apply for a loan from different financial organizations, you need your bank account details and credit score for getting high-amount loans. All these processes time consuming and very inconvenient.

With open banking in India, you can conveniently breeze past these processes in minutes.

Open banking opportunity in India

Open banking has an estimated market size of about 39 million customers. India is still in the initial phase to adopt open banking with a market size of around 3-4 million. However, due to the ease of financial services offered by the open banking system, it is expected to grow by 46% between 2019 and 2026. India offers a wide range of opportunities for the neo-banking segment. Most people, here have their deposits in traditional banks. According to the BCG FIBAC Report 2017, Indian households have put $1.8 trillion in deposits. With an ever-growing customer pool, open banking has a futuristic opportunity to cover the Indian market with around 600 million bankable population.

Open Banking Applications in India

  • CIBIL: CIBIL was set up in 2001. It is India’s first credit bureau built using open banking technology. It helps you calculate your credit score used widely by the bank and other financial institutions.
  • UPI (Unified Payments Interface): UPI is the most used open banking application in India. It gained momentum after demonetisation in 2016. It has made lives easier by seamlessly connecting bank accounts with the UPI app and thus carrying out real-time transactions and payments at one tap.
  • Central KYC: A single KYC repository that connects and verifies your identity with one click.

All these third-party institutions have made financial life easier by using secure banking data and carrying out transactions on the user’s behalf through open banking API. India introduced the Account Aggregator Framework (AA) that focuses on user’s safety and privacy and never share this confidential information. To ease this scenario, banks have come up with open banking APIs that allow third parties to exchange data securely. Sharing of valuable information between the Banks and the third-party providers (TPP) happens on regulated platforms that ensure financial data privacy and safety.

Banks adopting Open Banking in India

Many Indian banks have come up with their Open Banking API for fintech and third-party developers. Therefore, fintech and neo-banking financial institutions can build an application using open banking API to provide the best user experience.

  • Kotak API Banking: Kotak Mahindra Bank introduced API Banking in 2019 using open-banking technology. It developed its Open Banking API that allows fintech and developers to access the Kotak API and gather user’s information.
  • Yes Bank API Banking: The Yes Fintech Portal launched in 2019 tried to deliver many useful benefits. Yes Bank’s API banking sandbox consists of more than 50 APIs that act as an enabler for fintech and third-party developers.
  • HDFC API Banking: Developed and launched in 2019, the HDFC Bank Public API Portal has more than 142 APIs. The portal generates a unique key and allots it to each of the TPPs to access the HDFC database.
  • ICICI API Banking: ICICI Bank launched API Banking with 250 APIs in January 2020. It helps developers access more than 250 open banking APIs for building integrated software to collect and harness user data.

Future Trends of Open Banking in India

Data sharing is a significant factor focusing on equalizing the field for all the financial entities for level participation. The government has already given a green signal to embrace the open banking model, where the UPI is a prime example. M-Pesa, mobile banking, and TPPs are some of the success stories that originated from the concept of open banking in India. The future of open banking in India looks warm and welcoming, with both the public and private institutions co-existing and benefitting mutually.

Frequently Asked Questions

1. What is open banking?

Open banking is a digital financial system where the bank shares the user’s financial information with a third-party application, through Application Programming Interface (API), based on the user’s consent. It gives the user the comfort of getting customised financial services that saves both time and money.

2. Which Indian Banks are offering open banking APIs?

Indian banks such as Yes Bank, HDFC Bank, ICICI Bank, and Kotak Mahindra Bank offers open banking APIs for fintech and financial institutions.

3. What are some applications of open banking in India?

Open banking has enabled a few successful applications like CIBIL, central KYC, UPI, and wealth management apps like ETMoney, Zerodha, Groww, etc.

4. Is open banking safe and secure for the user?

Yes, open banking is completely safe and secure. The banks offer an end-to-end safe and secure API integration with the TPPs for security & privacy. Furthermore, the registered TPP solely uses the user’s information after the user’s consent.

5. Is open banking a way into the best banking future?

Open banking has improved customer’s experience. It has also acted as an enabler for many financial institutions to grow their business. Thus, it will surely change the way of the whole financial ecosystem in the near future.

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About the Author: Om Prakash