Indian banks are at crossroads. Customers are demanding more from banks, and fintech is creating avenues to improve customer experience. Through the use of secure third-party APIs (Application Program Interfaces), banks are becoming both customer-friendly and digital savvy. The launch of UPI (Unified Payment Interface) in 2016 set the course for the explosive growth of digital banking in India. It helped banks and customers realize the benefits of using secure and convenient digital third-party service providers.
APIs help enterprises achieve scale and speed, driving business composability in a volatile environment. Composability allows every app, process, and data to act as a building block – to retrofit existing architecture for better customer experiences. APIs function like these blocks helping banks integrate with third-party providers without compromising on compliance and security.
APIs, which are making enterprises more adaptive and resilient, are here to stay and will play a vital role in activating the API economy in India. Here’s why:
A new era of digital
The Indian banking space is moving from a place of reluctance to quick adoption of digital for day-to-day banking needs. Increased smartphone penetration and low data prices have catalyzed this digital shift. Adding to this is our young demographic dividend, which is increasingly moving away from cash. According to the Bank of International Settlements, fintech use is higher in countries with a younger population like India, South Africa and Colombia.
To say customer expectations have changed is an understatement. Customers are now preferring positive experiences over all else. They are now demanding services to help them make informed decisions. They seek seamless and instant services on digital channels with minimal or zero disruptions. APIs will help businesses offer customers seamless experiences, customized deals, access to multiple accounts, simplified payments, digital wallets, and effortless currency exchange, to state a few.
Win-win for banks and fintech
There has been a shift from competition to collaboration in the financial ecosystem. Banks and fintech realize the benefits of working together – banks offer the customer base, and fintech offers the technology and innovation edge. Together, they are building a secure digital bridge to improve customer experience and introduce a new range of services and products.
Evolving customer needs will nudge the partnership to dig deep into data. Data collected from customer behavior will help banks identify trends, curate personalized customer journeys, and offer tailor-made benefits. API analytics will open new revenue streams, which will leverage partnerships between financial institutions. Recently, a large private sector bank in India partnered with a small finance bank to introduce co-branded credit cards using API.
Open banking boosts innovation
In a digital-first new normal, open banking will drive business for financial services. Banks will acknowledge API’s agile framework and its ability to deliver faster go-to-market products and services. These banks will rely on API-based connectivity and use cloud technology to migrate data into the cloud, driving prompt response to dynamic customer needs. Keen on leveraging the fledgling market, customer-centric banks will create an open banking IT architecture exposing their APIs to a larger network of facilitators to collaborate, innovate, and build unique customer experiences.
Through APIs, banks can have a connected ecosystem and interact with the external world (customers, partners and insurers). APIs have become central to operations of any bank today, not only in helping them embrace the world of open banking but also streamlining their internal as well as external operations.
Moving the needle from ‘reactive’ to ‘resilient’
Gartner states that banks need to stop relying on reactive product delivery and start providing a delivery model transformation that uses public and private web APIs and apps. Thus, banks should be able to be move from a reactive to an API-centric approach and while doing so, they need to comply with standards (PCI-DSS, RBI guidelines, GDPR), allow partners to seamlessly onboard themselves, and consume APIs effectively to be able to monetize from it. Banks need to have a robust API platform to be able to secure, productize, monetize and analyze APIs to deep-dive into digital banking and meet changing customer demands.
India has made great strides in digital banking. 2022 will see this agenda being pushed further. And in the center of all this digital transformation, APIs will play a critical role in securely enabling interactions with all the moving parts that the Banking industry encompasses.
Views expressed in this article are the personal opinion of Ritesh Malhotra, Vice President – India Business, Bahwan CyberTek.