Open Banking — Is India ready?

Without a doubt, changing customer patterns, emergence of innovative competing elements like digital payment tools, and the advent of technologies like Blockchain, will ensure that banking in India will never be the same again. But, for Open Banking to become the way the country banks, will certainly take some doing.

One important fact also is, is there a choice? Just as the disruption to transport caused by Ola and Uber will ensure cab drives in India are never the same again, Open banking is also a necessary step forward. Mobility has all but taken over our lives, and hence, the disruptions caused are irreversible.

However, are our privacy laws ready for it?

“Confidentiality and data protection are the biggest priority for any bank and the nature of relationship with the customer is of a trust. Data confidentiality and data security is most important for us,” says R. Venkattesh, President and Head of Operations, Technology and Human Resources, DCB Bank.

The bank has recently launched its Open Banking Platform to create a collaborative ecosystem with enterprises, fintechs and app developers. How is DCB prioritizing data security and privacy?

“With the emergence of new technologies, we have built suitable controls within the system. We are implementing suitable policies and adhering to certain standards when it comes to cyber security. New vulnerabilities are identified and rectified on a constant basis so that we are able to balance security with positive customer expectation without compromising one for the other. This holds good for any bank going in for Open Banking,” he adds.

The biggest requirement will be from the regulatory side. India’s answer to GDPR, the data privacy regulations draft - India’s Data Protection Bill - being prepared by Justice B N Srikrishna Committee could have an answer to this new paradigm.

However, it is imperative that the questions of customer transparency and control remain the focus of product design decisions. While customers can be educated about their privacy rights and duties, there is also the matter of different data categories needing different levels of security, and informed consent requires understanding the implications of sharing before approving.

In addition, to help the initiative for digital banking that ensures financial inclusion, open banking could be a tool. However, the level of awareness about basic line security in the country is so abysmally low that we may not quite be ready for a responsibility where banks lay open their APIs. The big question of preparedness stays. Some experienced technology leaders understand the criticality of this situation.

“One of the key parts in ensuring that we are managing open APIs proactively is to be on our toes and continue to adapt, evolve and implement security controls. It is always about strengthening this whole aspect of cyber security and making sure that we understand that this is a journey and it is not a destination. However, there is always need for balance. Having over the top protocols, and ignoring the customer’s needs will result in the customer experiencing inconvenience. Therefore, the need is to have robust protocols and safeguards in place to facilitate genuine transactions is important from the customer experience perspective,” adds Venkattesh.

Regulations play an important role

To ensure more widespread adoption of Open Banking, the banking environment certainly needs changes in terms of technology, processes, infrastructure and customer readiness. When you look at the Indian scenario more than 50 percent of India’s population is less than ‘25 years’ age group. Today’s youngsters are more tech savvy. Surely, one of the key advantages here is on the demographics, which actually help create more adoption. The rapid adoption of mobile banking system and other payment systems through UPI or other methods stands testimony to this fact.

“When it comes to regulation, it is very pragmatic in terms of the open banking concept. As long as the customer confidentiality and data protection is concerned the requirement of various regulations and laws are properly taken care of. I think people need to make sure that they understand the regulations better and comply to it fully. There is a need to have an increased awareness about data protection regulations itself,” says Venkattesh.