Banking-as-a-service, backed by APIs, will soon be a reality: Ritesh Pai, Yes Bank

Mumbai headquartered Yes Bank recently launched its very own API sandbox, which allows its partners to plug specific banking functions into their own corporate solutions. 

Most digital business applications of today are API driven and play an important part in the delivery of business products. The API sandbox, which Yes Bank dubs the YES Fintech Developer, will enable users to test applications’ reactions to various API responses. 

Yes Bank claims that it is India’s largest banking API developer platform and would help corporates to visualize multiple use cases and find the best fit APIs for their banking needs. The sandbox currently hosts 50 APIs with use cases across management, payments, cards and CRM.

As group president and chief digital officer at the private sector bank, Ritesh Pai played a significant role in kicking off the bank’s API initiatives back over five years ago, along with a host of other technology implementations.  

In an interview with TechCircle, Pai, spoke about the significance of API-based banking, also known as open-banking. Pai firmly believes that as the millennial generation reduces visits to physical banks, the future of financial transactions will be ‘banking-as-a-service’ solutions, where banks can incorporate their APIs into solutions and apps provided by multiple other players in the market.

Edited excerpts:

Tell us more about your role and some of your key focus areas at Yes Bank.

It’s a horizontal role. The idea was to aggregate all the units under one umbrella so that the benefits of aggregation could be reaped by multiple units. Having all processes under one view allows us to scale better and incorporate similar solution frameworks across units. In the last four and a half years we have done reasonably well in terms of payments and we are among the top two in IndiaStack payments. 

Second is building solutions around mobile and mobility because we know that the smallest form factor is here to stay. With smartphone adoption increasing and a young population coming to the fray, mobility is the way forward. 90% of transactions still happen through cash, which is a clear area of focus for us.

Our focus is on digitization as we plan to simplify and automate internal workflows. If you can bring down the turnaround time, improve efficiency and improve customer service, you can create that wow! factor that would attract more customers. Another area embarked upon would be analytics and algorithms. We want to acquire niche customers instead of looking to target a broader client base, for which the right type of algorithms and data analysis would be the key. 

To be honest we are only scratching the surface of AI (artificial intelligence) and ML (machine learning) based technologies, and as these technologies evolve and more data is accumulated, we will see a higher success rate.

 What is the concept of open banking and how beneficial would it be to the industry?

One of the key initiatives in March 2015 was the implementation of API banking. Yes Bank has long relied on technology and innovation as its main differentiator among competitors.  We believe that banking-as-a-service, with the help of APIs, is soon going to be a reality.

Expecting the customer to walk into your branches and locations specifically will be a challenge with the new generation and millennials coming into the picture. API was a journey where we realized we had come a long way from asking customers to utilize our own net banking, mobile apps and our own ATMs.

We realized if we could provide banking as layers which financial services companies as well as corporates could incorporate into their financial solutions, it would bring in more efficiencies and be a win- win situation for both parties. The bank also need not provide overheads as far as administrative work is concerned. Corporates are also happy as banking transactions can be completed with the infrastructure built by themselves.  

Open banking is of significance because now we are seeing a lot of third party applications pivoting into a lot of other areas such as third party distributions, opening banking accounts, trying to disburse loans and acquire credit cards.

The question to answer is how we can provide the overall open banking architecture where the banking is not restricted to a subset of the transactions that happens in the bank, but provide a platform where partners can come and choose the APIs that would gel well with their product offerings and launch it quickly.

In a nutshell, the idea is to create a virtual digital banking experience.

What specific purposes would this API platform serve?

At a broad level, the API platform would serve three purposes. One, the partner would easily be able to identify which API would be the right fit for their infrastructure. Also note that these APIs are built on a microservices architecture which offers very nimble and agile methods for rendering these services. This also means that the developer has the luxury of orchestrating the way he wants it to function, which is better than monolithic APIs.

Second, the UI/UX is at the disposal of the partners as they are not dependent on some of the restrictions that monolithic APIs will bring.

Third, the number of APIs on the platform are large. To start with, we have got close to 50 APIs, but by the end of the financial year we should have around 100-plus APIs.

The platform will also be an exact mimic of my production database. A person who is experimenting can go through the many security aspects, transactions, high availability and other criteria.

How did the idea to build an API sandbox come about?

At Yes Bank we have always been practicing design thinking as a concept, where we try to absorb more. Sometimes the customer is unable to point out the issues. But when we help them at the backend to transact and create the products, we understand these issues better. It is about constant engagement with the customer and also keeping abreast of new age technologies that can augment existing entities.

Do you feel that the API sandbox could play a role in turning around the fortunes of Yes Bank, especially after last quarter’s performance?

Irrespective of the issues on the capital front, which should resolve soon, we have been clocking numbers in our payments record. in the recently conducted MeitY (Ministry of Electronics and Information Technology) awards we were the top bank in the digital payments award category. As long as the momentum is constant through launching new products and co-creating solutions, there was never any slowdown in terms of new initiatives.

How are you expanding into rural markets and how is technology making it easier?  

We follow the concept of ART (alliances and relationships through technologies) and we are also the largest consumers of IndiaStack APIs. The founder of PayNearby (payment app for local kirana stores) is also a part of our ecosystem.

We have a huge network of close to four lakh business correspondent agents catering to domestic remittances, Aadhaar-enabled payment services, bill payments and top-up recharges. We have empowered all of these business correspondents to become our financial services providers.

Although we as a bank might not have directly reached Tier 3 and Tier 4 locations on our own, because of the RBI regulations that allow us to empanel business correspondents and agents, we are able to be a part of their transactional services, if not the overall relationship services.