Reshaping Finance in India: Tailored APIs, Industry Trends, and Government's Role

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Muskaan Kapoor

Jan 15, 2024 — 4 min read

Reshaping Finance in India: Tailored APIs, Industry Trends, and Government's Role

This article has been contributed by Atish Shelar, Chief Operating Officer (COO), Tech Fini.

Emerging technologies in the financial services sector are transforming an industry that has remained historically resistant to change. Their large-scale integration and use throughout the financial services ecosystem have given rise to an explosion of new applications, business models, and innovative solutions.

Recognizing the increasing user preference for seamless digital experiences - banks, financial institutions, and Fintech players are investing in tech-led solutions that automate existing processes and provide cost efficiencies. Application Programming Interfaces (APIs) are one such pivotal element that has transitioned from being a technological tool to a strategic business priority for the banking and financial services industry.

Unearthing the Power of APIs
The Impact of Industry Trends
Understanding Government’s Role

Unearthing the Power of APIs

Given the growing user demand for convenience, security, and transparency, financial institutions are left with no option but to rethink the way financial services are delivered. Providers are more than ever looking to offer digital-first customer experiences and make frictionless finance a reality. APIs enable financial services providers to do this in an easy and secure way, enabling customers to gain access to their accounts, and financial information, and perform transactions.

APIs are also playing an active role in promoting open banking, which facilitates data exchange between banks and authorised third-party providers, thus allowing them to tap into the data and infrastructure of established players. The outcome of this adoption is increased competition, innovation, and deeper insights into customers’ financial behaviour and preferences. This treasure trove of data has thus helped them offer hyper-personalized customer experiences and meet their rising expectations.

Consequently, customers benefit from the broad gamut of financial products, better overall experiences, and more user-friendly interfaces. From the providers’ perspective, APIs are playing a significant role in driving innovation and partnerships between traditional banks and modern financial institutions and serving as the connecting link between all the players in the ecosystem, thus paving the way for better opportunities.

The Impact of Industry Trends

Besides the emergence of APIs, the financial services industry has witnessed rapid advancements in terms of other technological disruptions. The integration of artificial intelligence (AI) and data have been the biggest disruptors that have helped combat frauds manage risks more effectively and better understand customers by collecting data and optimizing their experiences. Not only has the technology allowed financial institutions to automate several operational tasks but it has also helped manage customer conversations and engagement through the implementation of chatbots.

Another industry trend driving the financial services industry is AI-powered insurance. Thanks to the technology’s super pattern recongition capabilities, we are slowly seeing a large number of insurers offering tailored insurance products designed on the basis of an assessment of an individual’s risk. This targeted approach solves two major concerns: it caters to individual insurance needs and lowers the cost of monthly premiums. The only challenge to be addressed is consumer data protection and privacy, and the risks surrounding AI biases.

Besides the AI and big data disruption, blockchain technology adoption has found great applications across the industry. Cross-border payments and settlements is one such area where blockchain-based solutions have helped escalate processes and eliminate intermediaries by enabling peer-to-peer transactions and automating complex operations. Financial institutions, alongside technology companies, are increasingly working on solutions to improve the scalability of blockchain networks with the goal to make it a more competitive alternative and navigate the complexities of sustaining in a digital economy.

Understanding Government’s Role

While the technology, private sector, and financial institutions are actively playing crucial roles in boosting financial inclusion and expanding access to financial services, the government’s role is equally important. Initiatives like the Digital India programme and regulations like the data protection law are a testament to the growing role of government in promoting formal financial services.

Today, we are swiftly moving towards a cashless economy – thanks to the government’s quest to normalise digital payments, coupled with the efforts taken by financial institutions to facilitate the right infrastructure, India has topped the list of five countries in digital payments. The application of the Digital Personal Data Protection (DPDP) Act, has also ushered in a revolutionary shift in the way the financial sector operates. This Act has necessitated a revision of traditional modalities in the financial services industry to create an environment that protects the personal data of users, without needlessly restricting or disturbing the usual course of business.

In essence, government strategies have a considerable impact on the financial services sector, given that the industry is interlinked with the economy and any policy change directly influences its dynamics. Hence, by aligning efforts, and long-term goals, and prioritizing the needs of the underserved population, both financial institutions and the government can continue to explore new opportunities, drive positive change, and reap the rewards of establishing a formal financial system.