Open banking in India: Evolution and applications

Abstract

In recent years, India has experienced a remarkable surge in the development and adoption of Fintech and Open Banking, two forces that have fundamentally reshaped the nation’s financial ecosystem. These innovations have not only democratized access to financial services but also challenged long-held perceptions of finance as an exclusive and complex domain. Fintech, often viewed as the engine of financial innovation, has proven instrumental in simplifying intricate processes, thereby enabling broader financial inclusion. Traditionally, financial literacy and accessibility were concentrated among a select, knowledgeable demographic. However, the evolution of Fintech—anchored in user-centric software architectures—has disrupted this norm by offering intuitive, accessible, and scalable solutions to diverse user segments. At the heart of this disruption is the emergence of Open Banking, a model that promotes secure data sharing among financial institutions, third-party providers, and customers, thereby enabling more personalized and efficient financial services.

Through a qualitative exploration that includes expert interviews—such as with Dhruv Tandon, a seasoned Fintech professional—the report illuminates how Open Banking is already being leveraged in the Indian context. Examples like the Aadhaar-enabled KYC process and the Unified Payments Interface (UPI) underscore how Open Banking infrastructure fosters interoperability, streamlines verification, and enables real-time digital payments. Aadhaar, as a centralized digital identity, facilitates standardized and secure data exchange across banking and governmental entities. UPI, in turn, exemplifies Open Banking by allowing seamless fund transfers across banks, enabled by a shared protocol for real-time data communication and authentication.

While Open Banking may appear technically intricate, the simplicity of its applications—rooted in deep system integration and robust backend protocols—makes it a powerful and scalable tool for solving complex financial challenges. This report underscores the growing need to appreciate how design simplicity, supported by architectural rigor, can lead to profound financial transformations.