All That You Need to Know About Open Banking
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Regulators across the world, including India, are closely watching Europe’s move to adopt open banking, where banks are expected to open their APIs and share customer data with third-party developers to enhance their products and services.
In India, we are observing banks opening their APIs to fintech companies for services like sign-in and account aggregation.
However, unlike the other countries where the pressure is on the bank to share customer data, domestically, it is only about limiting the customer data to the financial institution.
According to Sonali Kulkarni, Managing Director of Accenture Financial Services (Banking), if the banks do it, they have the opportunity to gain almost 20 per cent and if they continue to remain reactive they are most likely to lose about 10 – 30 per cent of their revenues.
They have opportunities in areas like real-time bespoke services, data monetization and creation of a marketplace for their customers
Additionally, she said, third-party developers are now in the position to get tremendous amount of data and unbundle or atomize banking products will continue to flow in, which is why fintechs will gain much more strength in the market compare to a bank.
For customers, it will be a win-win situation with better products and services along with cheaper credits options.
As long as customer data is protected, she thinks the Reserve Bank of India has left it on the bank to innovate themselves.
“RBI has been quite open in embracing some of these newer technologies. They have been at the forefront when it came to opening up Aadhaar as a means of providing KYC in the banks. So, today you can use UIDAI data through open architecture in order to fill your KYC forms. They also encourage banks to tie-up with fintechs and provide better services,” she added.
She anticipated that perhaps it is too early to comment whether there will be a Europe-type situation in India, as regulators are going to observe what is going to happen before taking any steps.
Open Banking – a Menace?
From a risk perspective, the biggest threat is customer data protection and authentication or security.
According to Kulkarni there are a few questions that need to be answered before we address this risk. They are:
- Who owns customer data?
- If something goes wrong, where would the responsibility lie - with the bank or the fintech?
- Who will the customer go to for queries and grievances?
From a user perspective, she suggested that customers be aware while sharing their data and know about its potential uses. “RBI and other regulators are taking proactive measures for customer awareness about sharing of passwords or OTPS. Today, we are far more relaxed about sharing and using data on platforms like Facebook, but your banking data should remain privileged,” she concluded.