Open Banking is just a rapidly developing and forward-thinking trend in the consumer finance sector. When we talk about “open banking,” we’re referring to the practice of allowing third-party service providers access to consumers’ financial information by way of application programming interfaces (APIs). This enables unrestricted access to the financial data held by banks and NBFCs, including banking transactions as well as other data. This makes it possible for customers, and financial institutions, including third-party service providers, to network their accounts so that they may share customer information. Customers are obligated to submit their consent to the bank before the bank is allowed to share their data through third-party service providers and remain compliant with regulatory requirements.
APIs provided by third parties access the information that has been disclosed by customers in order to make comparisons between current and past transactions as well as a variety of financial service possibilities.
Access to the data while maintaining its safety
Individuals routinely get open banking and internet banking confused with one another. As was discussed earlier, open banking refers to the process of sharing information between financial institutions, financial institutions, fintech, and other third-party app developers using application programming interfaces (APIs). Online banking refers to the practice of allowing account holders to access their own financial information and conduct online transactions straightforwardly through the mobile or web apps provided by their corresponding financial institutions.
Open banking in India is a form of banking that is both completely safe and secure. It employs the best security technologies available to safeguard and encrypt the data of its customers. The third-party service providers are likewise held to very high standards of confidentiality and are subject to strict regulations. The possibility of unauthorized access to or disclosure of sensitive financial information is not something that can be overlooked entirely. The security concerns associated with open banking are, however, significantly reduced. This is due to the fact that customers have complete control over the information that they choose to disclose to third-party businesses. Customers have access to check the settings of their accounts and can adjust them to meet their own needs.
The opportunity presented by India’s open banking system
The client base for open banking in India is anticipated to reach over 39 million people. Open banking is still in its early stages of implementation in India, which has a market size of approximately 3–4 million people. On the other hand, as a result of the convenience of the financial services provided by the open banking system, it is anticipated that its growth will increase by 46% between the years 2019 and 2026. The neo-banking sector has access to a rich and varied assortment of opportunities in India. The majority of individuals in this area keep their money in conventional banks. According to the findings of the BCG FIBAC Report for 2017, Indian families have deposited a total of $1.8 trillion. Open banking in India presents a potentially transformative opportunity to capture the Indian market, which has around 600 million bankable inhabitants. Its client pool is continually expanding.
Methods India Uses to Implement Open Banking
In contrast to the Open Banking proposals that have been implemented in the United States and Australia, which seem to be either entirely market-driven or entirely driven by regulations, India has adopted a hybrid model in which both the market and indeed the government play active roles in the progression of the ecosystem.
Conclusion
Open Banking in India is still growing, and with its benefits, more sectors are inclined towards it. So, with time we will see an evolution in the financial sector that will affect the Indian banking system as well as sectors of the country.