The decade started with a lot of expectations and major changes in the Banking sector. COVID has posed a lot of challenges and changes to the business community and the Banking sector was no different. All of this is an old story now and the Banking sector has realized the need for digitization and seamless open banking infrastructure is the key to achieve it. In this report, let us understand some of the major Open Banking initiatives in India, that lay grounds for more to come in 2021.
INDUSTRY/ GOVT LED INITIATIVES
The Account Aggregator concept has been in the market for a couple of years now. With more than three entities with the operational license to build the Account Aggregator system, namely One Money, CAMS Finserv, and Finvu, COVID has delayed the launch of their platforms in 2020. With no open information available in the market pertaining to the launch of these Account Aggregator platforms, early 2021 is just a mere expectation.
Account Aggregators will enable seamless Open Banking facilities by enabling customers consent to share their data digitally. It is expected that the BFSI domain will entirely rely on Account Aggregator services which are compliant with regulations building around Consumer Data Protection, to share or receive the data securely and digitally. The digital transfer of information will enable faster turnaround time from the BFSI service providers and serve the customers faster and better. Account Aggregators are the key to the transforming Open Banking initiatives in India and the network of the participants is going to be a massive one. With the higher focus on customer-centricity through a consent-driven approach and a collection of digital services available at the request of one-click through Account Aggregators, is the model that Open Banking services from banks in India will scale up to.
Open Credit Enablement Network
The new-age of financial inclusion in India which will democratize the credit-starved population of India is the Open Credit Enablement Network (OCEN). The traditional model has failed to provide the credit solution for the population in India that needed it the most. This public innovation framework is going to work in close association with Account Aggregators with an aim to bring large-scale innovation and integration capabilities into lending platforms. It hopes to provide loans to borrowers in a timely manner with the help of Technology-driven Open APIs that will put the borrower in the proximity of not just one, but a network of lenders. OCEN systems emphasize the use of technology to reduce the gaps in gathering documents
and digital disbursement of the loans, to serve the new
OCEN will empower open banking capabilities to individuals and MSMEs with the help of a standardized set of APIs that can effectively plugin the lending capabilities, into their current products and services. The impact of OCEN, the Open lending model, is to provide a universal language for lenders in the market to scale and build innovative financial credit products. With the ease of systemized lending, there is a greater chance of improved competition in the lending segment, offering loans at lucrative interest rates to the customers in need of it. The future of OCEN will pan out bringing large-scale global players into the Indian Lending Market. OCEN will ensure lending partners be regulatory compliant structure that will bring in innovation, customer centricity, and new investments into the market. This would reduce the credit gap in the market, leading to improvements in the lifestyle and business capabilities of the customers.
Data Empowerment and Protection Architecture
The Data Empowerment and Protection Architecture (DEPA) puts every citizen of India in the driving seat w.r.t their data. DEPA aims to bring democracy into consumer data space and the service providers, involving the use of standardized technology architecture. DEPA supports a secure, interoperable, and privacy-respecting framework for data sharing through Consent artifacts, data sharing through Open API, and a standard for Financial information. Consent Artefact will be based on ORGANS principle (Open, Revocable, Granular, Auditable, provide Notice, and maintain Security by design), to empower adoption of standards for data storage and processing techniques.
DEPA’s data governance concept in the new age Open banking system will ensure that the customers have complete control over their data. This will help them explore the financial product offerings and will bring Fintech players into the market ensuring innovation and competition. DEPA is focused to improve customer confidence in the financial services offered in the market and aims to improve customer participation in a secure way. Like the CDR in Australia, aiming to include all public services into the Data Protection, similarly, DEPA has the capability to spread across into various public services industries. Tighter data privacy laws could mean peace to customers and the firms requesting the data must implement advanced infrastructure, to safeguard the data from the customers.
Public Credit Registry
Public Credit Registry (PCR) is a repository initiative by RBI that will put together the data of individual and corporate borrowers (new and existing). The idea is to maintain the credit history, outstanding loans, repayment history of the borrowers, ancillary data like overdue utility payments, or tax payments data from tax authorities, and other primary data in a single large database. PCR aims to reduce the information asymmetry of the borrowers to the lenders in the market, giving the lenders a 360-degree view of the credit history of the customer. PCR will also ensure that the credit history of the customer is available to all the lenders, to evaluate the risk and creditworthiness of the customer.
The result of the risk and credit worthiness evaluated will not only improve the businesses to mitigate risk but also provide the choice for the customer i.e., to choose and compare the lenders and their services. TCS and Dun & Bradstreet have been identified as the bidders at the forefront, with a pending technical evaluation from RBI.
PCR will reduce the information asymmetry in the market which in turn is focused to improve the business conditions. The open repository will ensure that the lenders have an account of the individuals, corporates, SMEs, and MSMEs on loan outstanding, repayments, loan exposure, collateral including the incoming cashflows, helping the lenders reduce bad debts. PCR will also ensure the monitoring of the microfinance industry, improving transparency in the market. Though there are heaps of initiatives ahead to be implemented, for the PCR to get Operational, there is a lot it can bring to the table to both customers and lenders to ensure a win-win proposition. With the Open API technology, OCEN and PCR, the lending industry is due for massive reforms that can transform the outlook of the industry.
INITIATIVES BY PRIVATE PLAYERS IN THE COUNTRY
‘ICICI Stack’ is a set of APIs and comprehensive digital banking services to an individual or commercial customers. ICICI Stack offers more than 500 services that provide all the banking requirements to the customers in one location. Most of the services provided are the first time the industry has experienced and are available on the Bank’s portable platform.
This fine initiative from ICICI Bank offers digital services to Individual customers like the opening of instant savings account, Fixed Deposit, Public Provident Fund, Buy Insurance, wealth creation, among others. The Business customers can use the facilities like Insta Biz, Point of Sale, or Payment gateway (as the need suits the customer), Insta Overdraft, access to Biz circle, among more. ICICI Stack is leading the Open Banking path with seamless digital facilities available to the customers 24*7, without visiting the branch. Retail customers can have an enriched experience while business customers can improve productivity even while away from the office. It was the initiative that was Just in time when the situation demanded business behind closed doors and this could be the future but in a different and better situation.
Angel Broking and Edelweiss
The Banking industry is raking up the technological innovation through Open API’s is also spreading to the specialty firms in the BFSI segment. Firms like Angel Broking (Financial Services – Trading) and Edelweiss (Insurance) have also introduced Open APIs. Witnessing these innovations, one can now agree that the whole BFSI segment is bullish over the business-centric Open API approach.
Analyzing the case of Edelweiss General Insurance, the Open APIs can enable enhanced claim process, collaboration with other insurance providers, and distributors with low cost of integration with ease of access to information in real-time. The API sharing will give the customer the choice and a better experience on all claims or post-insurance needs. Other big players also enabling APIs will ensure high participation of Technology-driven Insurance that will make life easy for customers. Angel Broking’s Open API will enable new investments and trading platforms that can run without the burden of licensing. Their Open API will enable access to end-to-end broking services and enable new products to be trading ready in minutes. This will enable traders to have the flexibility to implement their own algorithms for trading, new start-ups building innovative solutions, and to offer personalized trading platforms and websites catering to investing and trading audiences. The impact of Open API from Angel Broking will bring the long-awaited personal touch to not-so-tech-savvy customers, making trading the next wonder segment that can transform the financial services industry. The future of the industry could be very interesting, new start-ups building robotic advisory services on stocks or Language assistants or platforms that can speak to the customers, eliminating the lag in real-time trades.
ICICI Bank interoperable Banking Application
ICICI Bank has emerged as the tech innovation leader among the other banks in the industry. They have recently launched a ‘first-of-its-
kind’ mobile application ‘iMobile Pay’ which can now allow payments and banking services to customers of any bank. Through ‘iMobile Pay’ customers can generate UPI IDs, pay bills, shopping, fund transfer, use digital wallets, online recharge, and Banking services like savings accounts, loans, investments, credit cards, among others by linking their account to the ‘iMobile Pay’ application.
Taking the technology capability of the other banks out of the equation, this initiative from ICICI bank will enable the customers’ movement towards Open Banking, as it was largely market-driven to date. ‘iMobile Pay’ could facilitate the customers of regional, cooperative, and small banks with UPI, bill payments or other seamless banking services. This innovative solution from ICICI bank could set other banks with sophisticated applications to attract a new wave of customers, bringing in large-scale interoperability and personalization to the banking sector. The smaller banks will have to gear up to this tech prowess, else the customers could gradually play makeshift from one bank to another. Will this initiate the banking industry to port accounts from one bank to another like mobile numbers, along with the credit history of the customer? That would be something that we can think of in the future.
HDFC Bank Smart Hub Merchant Solutions 3.0 for SMEs
‘Smart-Hub Merchant Solutions 3.0’ is an HDFC bank initiative to allow self-employed professionals and merchants to accept payments in-store, online, and on the go by the instant current account offering. The bank looking at 20 million customers to use the smart hub from semi-urban and rural India to deepen the market penetration of digital payments across India. Smart-Hub will be both Mobile applications-based, and web-based. It will support a range of features like POS, Digital khata, collection reminders, management of billing, inventory, payments, and lending based on their bank history/business capability. This technology-driven Business initiative will provide an ideal forum for the merchants to enter the digital ecosystem through simple and convenient solutions. Smart Hub will take digital payments and technology to manage the businesses, to rural India and this will improve the bankable capabilities as well as bring in digital reforms to small-time vendors. The digitization of every business will transform India into a completely digital country in the future, which might not be too far away.
2020 has been a revolutionary year in terms of Technology improvements, or investments in technological services from every firm, to go digital in every step. Major changes and reforms coming from the BFSI segment, especially in the Banking industry. With almost every major bank heavily investing in tech, infrastructure could mean the banks will soon be completely capable of executing Open Banking services. 2021 could witness the most exciting Open Banking concepts turn into reality from the conceptual stage, marking it to be the year of reforms and innovation.