Businesses leveraging APIs are witnessing a continuous rise in innovation and productivity. APIs are now a prominent part of digital transformation strategies for many banks and fintech since they help to integrate and optimize the data lying across organizations, systems, and databases.
APIs are the core of collaborative and valuable ecosystem partnerships. By defining the communication protocols between various internal and external applications across the enterprise functions, the APIs have provided the freedom of accessing accurate and up-to-date data in real-time to both the customers and bankers. Many banks and fintech are leveraging open banking APIs for building enhanced products and delivering business value at scale as opposed to ripping and replacing legacy products and creating everything from scratch, with the risk of obsolescence due to the rapidly evolving technology landscape and customer needs changing faster than ever.
Stitching the components of Digital Strategy with API
The components of a successful digital strategy are Customer Experience, Data, Technology, and Data Security. The industry has been undergoing a data revolution over the past few years and the leaders of this revolution will be players who leverage on their digital strengths to provide the best experience for their customers. By utilizing the raw data collected at each customer touchpoint, to gather critical insights, these players are able to pinpoint their target group and then reach them through the right channels with the right solutions.
API impacts these individual components by creating protocol around the usage of data, the business process involved in the communication, and the deliverables in terms of customer experience.
Customers onboarding for small value loan distribution enabled via API:
The lenders can take in PAN details of the partner, use NSDL API to verify the data instantly, generate GSTIN from PAN through GSTN. This additional data can be used to fetch establishment details like address, date of incorporation, etc. and automatically fill the application form. The bank account can be verified via NPCI’s penny drop mechanism. Bank statements and GST 3B returns can be fetched via APIs to analyze the financials for the merchant. The final agreement can be signed via OTP on mobile
With very few inputs and a consent-based application approach, a holistic picture is generated via data fetched through APIs, and a paper-heavy application process is reduced to a completely digital journey of few steps. The data inputted by the merchant/partner is verified, and advanced analytics is used to validate the returns and bank statements of the partner reducing risks for financial fraud.
Enabling banking services available on accounting platform
Open Banking is emerging as the next big thing in financial services and it is driven through Open APIs on banking data. One major use case within open banking is providing banking services on an accounting platform. SAAS (Software-As-A-Service) based accounting players are best placed on integrating banking APIs and enabling SMEs to manage banking and accounting from the same platform. Using banking APIs, customers could able to fetch their bank balances, statements on the accounting platform itself and do reconciliation. In addition, customers may initiative payments using payments APIs from the platform. Bank Open and Ezo have been notable Fintechs in the accounting-based Neo Bank platform.
The emergence of API stack players
As part of digital ecosystem evolution, the next set of API Stack players, also known as Infrastructure API provider or API enablement Technology are playing a significant role in driving digitization programs at Banks/ FIs and success stories of Fintechs and startups. Developers are their prime target as it enables developers to pick up available APIs and plug into their products. There is significant interest from investors towards these companies. It is mainly because of their ability to fast track and power process automation and simplification.
One such player who provides APIs for digital onboarding and authentication in India is AuthBridge, a fintech organization that helps to design the digital on-boarding journeys for the BFSI segment via APIs and advanced AI technologies. The design of the onboarding journey includes verification of identity, businesses, financial, criminal litigation along with digital address verification and digital signing. AuthBridge has enabled these features through its API gateway platform. which helps create real-time onboarding and smoothen user journey flows
The regulatory framework issued by the Reserve Bank of India allows Banks and NBFCs to use a Video-based customer identification process. This has allowed financial institutions to dramatically reduce the time and cost associated with the KYC process. KYC solution providers including AuthBridge are now launching Video KYC and Video PD solution for KYC and Re-KYC for new accounts and customer onboarding for lending, using Data extraction via OCR and real-time validation via PAN and offline Aadhaar APIs. Combined with facial recognition and gesture-based liveness detection, customer identification can be completed in a TAT of a few minutes. Automated agent assignment, screen captures, geo-location tagging, and an end to end encrypted video audio storage are added features to create a secure and error-free identification.
API as a turnkey solution for innovation in the Financial Services
Thanks to the way the APIs are enabling data by creating platforms where no intimate knowledge of the accessed software is required, financial services players are witnessing faster go-to-market and reduced customer acquisition costs. APIs have now become the core of accelerated, new, and innovative development projects.
Consuming an API is as easy as building structures with Lego bricks, without necessarily spending resources on programming or R&D. These new-age Third-party API integrators and gateways can help to build APIs and create access to Bank APIs, respectively. They can connect people, places, systems, data, and algorithms for products and services. The way the APIs are consumed can be customized as per individual requirements.
The Regtech has become a critical ecosystem partner in handling, integrating these APIs into financial services. The data generated via this APIs help to monitor and manage KYC/AML and other compliance-related procedures, along with risk mitigation associated with identity tampering and financial frauds.
Fintech organizations are now partnering with BFSI companies to build on APIs and help in standardizing, automating, and expediting their current processes, removing concerns around data authenticity and multi-source dependencies, facilitating agile development in response to changing consumer and technology needs. But, the beneficiaries of these emerging API systems are the customers who now have access to better competitive products and great customer experience.