Page 47 - Banking Finance February 2025
P. 47

ARTICLE





          Opportunities and



          Risk for Traditional



          Banks in Embracing

                                                                                             Harsh M Sankhala
          Open Banking                                                                     Chief Manager, Research,

                                                                                                  SBIIT, Hyderabad







           Technology has simplified our lives by making the processes easier and integrating into our daily
           routines. Today we  cannot  imagine  making  payments  without  using UPI,  that's  the  impact
           technology had on the payment systems. UPI has achieved such rapid success in a short period.




         T       echnology has simplified our lives by making the  the  discretion/consent  of  the  customer. The  concept
                 processes easier and integrating into our daily
                                                              originated  around  2007  with  the  European  Union's
                 routines.  Today  we  cannot  imagine  making
          payments without using UPI, that's the impact technology  implementation of the "Payment Services Directive" (PSD),
                                                              creating uniform payment solutions across EU nations. After
          had on the payment systems. UPI has achieved such rapid  that in 2015, "Payment Services Directive 2" (PSD 2) was
          success in a short period. The total number of payments  introduced, to widen the scope of payment systems. In India,
          done through UPI channel for 23-24 stands at 13.11 trillion  open banking began with RBI establishing an entity called
          which is around 80% of the total digital payments made in  "Account Aggregator (AA)" in 2016.
          India during the period.  Beyond its user-friendly interface,
          it's the interoperability of UPI that stands out as a game
          changer. A major credit for the growth of instruments like
          UPI goes to the Open Banking. It has helped in connecting
          traditional banks and innovative FinTechs through APIs to
          provide solutions for payments, lending, investing etc.  Open
          banking has fostered an era of collaboration between the
          banks and FinTechs. It has been a win-win for all i.e.  Banks,
          FinTechs, and customers.

          What is Open Banking?

          Open Banking refers to access to the customer data of the
          banks to third-party developers and service providers via
          APIs to develop and offer competitive products and services.
          The sharing of data to the third party API is solely based on  Figure 1: How Open Banking Works


            42 | 2025 | FEBRUARY                                                           | BANKING FINANCE
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