Open banking: how API-driven finance is changing the Indian landscape

Picture this: you open one app and see all your bank accounts, credit cards, and investments in one place. You apply for a loan and get approved in minutes, not weeks. Your budgeting app sorts your spending and suggests ways to save money.

This is open banking, and it's changing how Indians manage money.

What is open banking?

Open banking lets other companies access your financial data through secure APIs (application programming interfaces). APIs are digital bridges that connect different software systems.

When you give permission, these APIs share your banking information with approved financial apps and services. The keyword is "permission" – you control what data gets shared and with whom.

Here's an example: instead of typing your bank transactions into a budgeting app, open banking lets the app get this data directly from your bank. The result? Real-time financial insights without the manual work.

How open banking works in practice

The process involves three main players:

Banks provide APIs that securely share customer data with approved third parties.

Third-party providers (TPPs) build apps and services using this banking data to create better financial products.

Customers benefit from more personalized, convenient financial services.

Let's say you want to apply for a personal loan. Traditionally, you'd gather bank statements, salary slips, and other documents. With open banking, the lender can access your financial data directly (with your consent) and make faster decisions based on real-time information.

India's open banking journey

India started its open banking journey with the Account Aggregator (AA) framework in 2021. The Reserve Bank of India (RBI) created this system to help Indians share their financial data securely.

The AA framework works like a digital vault. Licensed account aggregators store and share your financial information only when you authorize it. Major players like CAMS, Finvu, and OneMoney have received AA licenses.

Unlike Europe's PSD2 regulation or the UK's open banking initiative, India's approach focuses on consent-based data sharing rather than mandating banks to open their APIs.

The framework covers:

• Bank account details
• Credit history
• Insurance policies
• Investment portfolios
• Tax records
• Pension accounts

Benefits for everyday Indians

Open banking brings several advantages that make financial management easier and more efficient.

Faster loan applications

Getting a loan becomes faster. Instead of collecting documents, you can share your financial data digitally. Banks get a complete picture of your finances instantly. This leads to quicker approvals and better interest rates.

Better financial planning

See all your accounts, investments, and expenses on one dashboard. Open banking makes this possible. You can track spending patterns, set budgets, and get financial advice based on your actual behavior.

Easier account switching

Switching banks meant updating multiple payment instructions and moving your banking history. Open banking makes this easier by helping you transfer your financial data and set up new payment arrangements.

Custom financial products

Banks and fintech companies can offer products made for your specific needs. If you're a freelancer with irregular income, they might suggest a flexible savings plan. If you spend a lot on groceries, they might recommend a credit card with grocery rewards.

Less paperwork

No more printing bank statements and carrying documents. Open banking lets you share financial information digitally. This makes applications for loans, insurance, and other services smoother.

Real-world applications in India

Several services are already using open banking principles in India.

Account platforms like Onemoney and Finvu help users view all their financial accounts in one place. You can track investments, check account balances, and monitor expenses across multiple banks.

Lending platforms use open banking data to offer instant loans. Companies like Capital Float and Lendingkart can check creditworthiness in real-time. This makes business loans available to small enterprises within hours.

Wealth management apps give investment advice based on your complete financial picture. Instead of generic recommendations, these apps suggest investments that match your income, expenses, and financial goals.

Insurance companies use financial data to offer custom policies. Instead of one-size-fits-all products, you can get insurance coverage that matches your actual risk profile and financial situation.

Challenges and concerns

While open banking offers many benefits, it also raises concerns that need addressing.

Data security remains the biggest worry. Sharing financial information with multiple parties increases the risk of data breaches. However, the AA framework includes strong encryption and security measures to protect user data.

Privacy concerns arise when multiple companies access your financial information. Users need clear control over what data gets shared and the ability to revoke access when needed.

Digital literacy gaps mean some users might not understand what they're agreeing to when sharing financial data. Better education and simpler consent processes are needed.

Technology infrastructure in India varies widely. While urban areas have good internet connectivity, rural areas might face challenges accessing open banking services.

The regulatory landscape

The RBI has taken a measured approach to open banking regulation. The Account Aggregator framework includes strict guidelines for data protection and user consent.

Key regulatory features include:

• Mandatory consent from users before data sharing
• Time-limited data access permissions
• Strong encryption requirements
• Regular audits of account aggregators
• Clear guidelines for dispute resolution

The RBI is also working on expanding the framework to include more types of financial data and services.

Prospects

Open banking in India is still in its early stages, but the potential is enormous.

Digital payment integration will become more seamless. UPI has already revolutionized payments in India, and open banking can make financial services even more integrated.

Small business financing will improve significantly. Banks can better assess the creditworthiness of small businesses by accessing their complete financial picture, including cash flows and payment patterns.

Rural financial inclusion could accelerate through simplified, data-driven financial products designed for rural populations.

Cross-border services will become easier for Indians working abroad or doing business internationally.

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How businesses benefit

Open banking isn't just for individual consumers. Businesses, especially small and medium enterprises, gain significant advantages.

Faster credit decisions help businesses access working capital quickly. Banks can assess business finances in real-time, reducing loan processing times from weeks to days or hours.

Better cash flow management becomes possible when businesses can view all their accounts and transactions in one place. This helps with planning and financial decision-making.

Automated accounting reduces manual bookkeeping work. Financial data flows directly into accounting software, reducing errors and saving time.

Supplier financing becomes more accessible when businesses can easily share their financial information with suppliers and financing partners.

The role of technology partners

For businesses looking to leverage open banking, working with the right technology partner makes all the difference. This is where platforms like Winvesta come into play.

Winvesta helps businesses navigate the open banking landscape by providing:

• Secure API integrations with multiple banks and financial institutions
• Compliance with regulatory requirements
• Data analytics tools to make sense of financial information
• Support for international transactions and multi-currency operations

Whether you're a startup looking to integrate banking services into your app or an established business wanting to streamline financial operations, having an experienced partner simplifies the journey.

Getting started with open banking

If you're interested in using open banking services, start small and choose reputable providers.

Research service providers carefully. Look for companies with proper licenses and good security practices.

Understand consent mechanisms before sharing your data. Know what information you're sharing and for how long.

Monitor your data usage regularly. Check which services have access to your financial information and revoke access when no longer needed.

Keep security practices updated by using strong passwords and enabling two-factor authentication where available.

Open banking represents a fundamental shift in how financial services work in India. Putting consumers in control of their financial data enables more personalized, efficient, and inclusive financial services.

The technology promises to make banking more convenient, loans more accessible, and financial planning more effective. While challenges around security and privacy need continued attention, the regulatory framework provides a solid foundation for growth.

As more banks and fintech companies adopt open banking practices, Indians can expect even more innovative financial products and services. The key is choosing the right partners and platforms to help navigate this new financial landscape safely and effectively.

For businesses ready to embrace this transformation, the opportunities are significant. With proper planning and the right technology partners, open banking can unlock new revenue streams, improve customer experiences, and create competitive advantages in an increasingly digital financial world.

Frequently asked questions about investing in open banking?

1) What is meant by open banking?

Open banking is a system where banks and financial institutions provide secure, consent-based access to customer financial data to authorized third-party providers via APIs. This enables the development of innovative financial services and products, such as budgeting tools, payment solutions, and personalized financial advice.

2) Is UPI an example of open banking?

While UPI (Unified Payments Interface) is not typically labeled as an open banking initiative, it operates on similar principles. UPI uses standardized APIs to enable instant, secure payments and fund transfers between banks, making it one of the largest open banking implementations in the world.

3) What is an example of an open bank?

Examples of open banks include Capital One and Citi, which offer APIs for third-party developers to access customer account data (with consent), initiate payments, and provide integrated financial services within external apps. In India, banks like Yes Bank and RBL have pioneered open banking by providing APIs for payments, lending, and other services.

4) What is the open banking system in India?

India’s open banking system is built on the India Stack—a set of APIs including UPI, eKYC, and Aadhaar authentication—facilitating secure data sharing and digital transactions. The RBI-regulated Account Aggregator framework further enables customers to share their financial data with third-party providers, enhancing access to credit, personalized financial products, and financial inclusion.

Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Please consult a qualified professional before making financial decisions. The views expressed are those of the author and may not reflect the official policy of any institution mentioned.