How NBFCs are getting profited from API Banking

By Rohit Taneja, Founder & CEO, Decentro

Non-Banking Financial Companies (NBFCs) have played a crucial role in addressing the financial needs of millions left unserved or under-served by banks. With an increase in the cost of borrowing and recent regulations, they have shifted focus to niche target segments with innovative and personalised products. Opting and investing in new technologies and digitalisation in the last few years has powered rapid growth amongst NBFCs in India. The Indian lending industry is poised at an optimistic $100 billion by 2023.

Many new-age Fintechs have revolutionised and redesigned the entire credit segment by digitising the sub-processes of a lending cycle that includes pre-approval of loan applications, loan origination, loan management, debt recovery, and post-lending customer service. Today loan disbursals do not rely on salary slips. Salary spendings collected by digital footprint data points across segments and channels form the consideration. The impact is that gig workers without a regular and steady flow of income are eligible for a loan, and so are young working professionals who do not have a credible credit line.

This transformation calls for more technology-based advancements to onboard customers using seamless KYC verification, facilitating easy loan disbursal, collections, and real-time reconciliation. We have hardly scratched the surface of this massive technological prowess.

Application Programming Interface (API) is a recent trend in Banking and Financial Services. They are a set of general information that allows the admittance of software programmes. This technology enables Non-Banking Financial Companies (NBFCs) to share their data through a third-party application. APIs are transforming businesses by offering endless possibilities to banks and financial companies. According to a Research and Market report, by the end of 2024, the global API management market is expected to reach $6.2 billion.

As competition rises between traditional banks and fintech startups, banks have started opting for APIs to embrace a digital ecosystem and assimilate more globally. By embracing APIs, NBFCs are enhancing their services and rapidly adapting to the evolving demands of the customers. Banking APIs facilitate easy and fast KYC and onboarding, opening accounts (virtual accounts, savings or business accounts), fintech payments, debit cards, and launching BNPL products, This makes way for better business growth, customer engagement, and retention.

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