By Reeju Datta
India’s digital payments story has been shaped by infrastructure. Aadhaar gave us identity at scale and UPI gave us real-time, interoperable payments across platforms, with January of this year alone seeing close to 17 billion UPI transactions in the country. These aren’t just technical achievements; they are public infrastructure breakthroughs that let businesses move faster, build better, and reach more people.
But while UPI transformed peer-to-peer and merchant payments, netbanking, the backbone for high-value digital transactions, has been left behind. Fragmented, clunky, and expensive to integrate, netbanking has not kept pace with the demands of India’s digital economy. That is now set to change.
NBBL's move to make netbanking interoperable is one of the most significant (and underappreciated) shifts in India’s payments architecture. And like UPI before it, it opens the door to a new wave of innovation, especially for fintechs and high-trust sectors like lending, insurance, and education.
The Missed Potential of Netbanking
For years, netbanking has been stuck in the past. Every bank has its own login flow, response codes, security layers, and UX quirks. Payment Aggregators (PAs) must integrate each one manually. As a result, onboarding can take weeks or months per bank, making it prohibitively difficult for PAs to offer netbanking as a payment method at all.
This fragmentation results in unpredictable success rates, broken user experiences, especially on mobile, and higher operational costs. Consumers are left frustrated, and many merchants, even those processing high-value transactions, shy away from using it.
Yet, netbanking is still critical. It powers payments where UPI often encounters behavioural or technical friction – segments like education fees, insurance premiums, real estate, taxes, and mutual fund investments. It’s a trusted instrument for transactions in the ₹10,000 to ₹5,00,000 range.
The Case for Interoperability
Interoperability solves for netbanking’s ease at the protocol level. Just as UPI created a unified flow across banks and apps, NBBL's interoperable netbanking initiative proposes a standardised API layer that every participating bank can support.
This means developers only need to integrate once instead of building 30 separate connections, merchants benefit from consistent behaviour across all banks, and consumers experience a reliable, seamless checkout every time.
But beyond convenience, this is about unlocking meaningful scale for startups, enterprises, and the financial system itself.
A New Rail for High-Value Digital Flows
Think of interoperable netbanking as the high-value counterpart to UPI. While UPI handles high-frequency, low-ticket payments (₹10–₹5,000), netbanking can be optimised for low-frequency, high-ticket transactions (₹10,000–₹5,00,000+). Currently, netbanking average ticket sizes often exceed INR 2.5 lakhs.
With standard APIs and real-time status visibility, PAs can build intelligent payment flows: automated retries, fallback to alternate banks, and risk-based routing, all of which improve transaction success rates and customer experience. Even a 1–2% lift in success rates can result in crores in recovered revenue for large merchants.
Not Just UX, A Better Business Model
Unlike UPI, which currently operates on a zero-MDR model, netbanking carries an MDR in the range of 0.5–1%. For high-value categories, merchants are usually willing to pay for reliability, reconciliation, and reporting.
This creates a monetisable, premium payments channel especially relevant for sectors like lending (EMI collections, disbursals), wealth (mutual fund SIPs, lump sum investments), education (fee payments), insurance (policy premiums, payouts) and government services (taxes, e-challans).
Uniform protocols also open doors for innovations: instant refunds, standardised dispute resolution, automated reconciliation, and better support for recurring or escrow flows.
A Level Playing Field for Smaller Banks
Until now, only large banks with the resources to build custom integrations with PAs could participate in merchant payments. Interoperability removes that barrier. Smaller banks, once part of the unified ecosystem, can instantly plug into merchant flows and earn MDR, turning payments into a revenue stream.
A Regulatory Win
With standard APIs, transparency improves dramatically. Regulators can monitor real-time transaction success/failure data across banks and aggregators. This simplifies fraud detection, dispute resolution, and customer protection. A standardized ecosystem makes compliance easier for all stakeholders without compromising innovation.
Beyond Payments: Infrastructure for the Next Decade
Interoperable netbanking can become the foundation for much more than payments. With standardized rails, fintechs can build recurring mandates for SIPs or loan repayments, disbursements and claims in insurance, secure escrow and milestone-based payments for real estate and bulk vendor payouts for enterprises.
All of this becomes possible with a single integration, dramatically reducing time-to-market for new financial products.
The Road Ahead
If India does this right, interoperable netbanking could exceed UPI in total value processed within the next decade. For fintechs and PAs, it removes a key barrier to scale. For banks, especially smaller ones, it opens new revenue streams. For regulators, it strengthens oversight. And for consumers and businesses, it brings consistency, trust, and speed to high-value digital transactions.
We’ve already seen how public infrastructure like Aadhaar and UPI changed the game. Interoperable netbanking is the next step in that journey.
(Reeju Datta is Co-founder, Cashfree Payments.)
Views are personal and do not represent the stand of this publication.
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