Page 32 - Banking Finance December 2023

ARTICLE

personal finance management, lending, and payments. In Key opportunities with open banking in India:
addition, open banking is also aimed at improving the India has over 1.2 billion mobile connections and the number
customer experience by giving customers greater control of smartphone users is expected to reach 829 million by 2023
over their financial data and enabling them to share it with year end, creating a large market for mobile banking and
other providers that offer services that better meet their open banking services. A report by EY India estimates that
needs. As more countries adopt open banking regulations India's open banking market could reach $5 billion by 2023.
and standards, we can expect to see even greater Another report by McKinsey & Company predicts India's
innovation and competition in the financial services industry, fintech sector could grow to $150-160 billion by 2025, driven
as well as improved customer experiences and increased by the growth in digital payments and open banking services.
financial inclusion. Another report by BCG, indicates that open banking could
help unlock $500 billion in value for India's financial sector
Structure of open banking by 2025. Hence open banking touches the Indian banking

The structure of open banking involves three key system in a different way with various opportunities as
following areas -
elements:
1. Improved Customer Experience: Open banking enables
1. Banks or other financial institutions: These institutions
financial institutions to offer customers a more
hold the customer's financial data and are responsible
personalized and tailored experience. By accessing a
for providing access to this data through open APIs.
wider range of financial data, institutions can offer
Banks must ensure that their APIs are secure and
customized products and services that meet the specific
compliant with data protection regulations.
needs of their customers.
2. Third-party providers: These providers are authorized
2. New Revenue Streams: Open banking enables financial
by customers to access their financial data from banks
institutions to generate new revenue streams by
through open APIs. Third-party providers can be fintech offering value-added services such as financial advice,
startups, payment service providers, or any other
data analytics, and loyalty programs.
provider of financial services.
3. Better Risk Management: Open banking can provide
3. Customers: Customers are the owners of their financial
financial institutions with a more comprehensive view
data and have the right to share this data with
of their customers' financial profiles, which can help
authorized third-party providers. Customers must give
them to manage risk more effectively and make more
explicit consent before their data can be accessed, and
informed lending decisions.
they can revoke this consent at any time.
4. Collaboration and Partnerships: Open banking creates
The structure of open banking is built on the principles of
security, transparency, and innovation. Banks must ensure
that their APIs are secure and compliant with data protection
regulations to protect customers' financial data from
unauthorized access or misuse. By using open APIs,
customers can securely and easily share their financial data
with other institutions, allowing them to access a wider
range of financial services and products. This can include
everything from loan products and credit cards to
investment advice and insurance. On the other hand FIs also
have realized that they are now custodians and not owners
of data and are trying to move to alternative revenue
streams after receiving customer consent.

BANKING FINANCE | DECEMBER | 2023 | 29