Yes Bank says next decade is for API Banking; developing API marketplace for corporates – ET BFSI

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Customers seek instant gratification with any brand they interact or transact with, banking is similar and not lagging behind when it comes to instant gratification. This can be done only through APIs and was pioneered by Yes Bank in the Indian banking space.Ajay Rajan, Global Head – Transaction Banking at Yes Bank shares the API Banking journey, monetizing APIs and the strategy ahead. Rajan added, “Internal APIs have been exposed over more than a decade and Yes Bank pioneered the same on the corporate side. Instant gratification on the corporate side similar to the services on the retail side was the genesis of our API banking strategy. We did it with Snapdeal, they enquired about customer refund on immediate basis (commonly known as Payouts), while the payment part was solved by the IMPS and the information and reconciliation was solved by connecting APIs with Snapdeal.”

Rajan said over the time we’ve co-created and innovated with our partners and today it has proliferated into a large extent. “We’ve close to 350+ APIs which we’ve developed and over 1700+ clients live on API banking which is arguably the largest in the industry. On the API Banking side we’ve grown 60% CAGR QoQ over the last 4-5 years.”

Dovetailing API Banking into traditional bankingAPI Banking has not only to do with new age payment systems but how banks can add value on top of APIs. Rajan explains their tie-up with Tata Motors where they customized virtual account solutions with their APIs and allowed the dealers of Tata Motors to remit money in the virtual account.

He explained, “When the money gets credited, we will send an instant notification to their ERP against the dealer code with the amount which they’ve sent. It’s a model of instant gratification. Similarly we did it with Western Union for cross-border remittance; Indiabulls’ Dhani Application for instant gold loans is a similar example.”

“We’ve not only built it, but also proliferated & replicated across 1500+ clients. Our API volumes are 25% of total volumes which is a meaningful and significant number.”

Monetising APIs

API Banking is an integration which is just a channel to integrate with the bank’s client. Rajan explained, “Yes Bank created solutions on top of API banking. All these co-creation with 1000+ companies have created business models on top of these APIs hence we are able to charge for API Integration/Solutions and when we add value to my customer we can charge for the service.”

Yes Bank created solutions on top of API banking. All these co-creation with 1000+ companies have created business models on top of these APIs hence we are able to charge for API Integration/Solutions and when we add value to my customer we can charge for the service.Ajay Rajan, Global Head – Transaction Banking, Yes Bank

At Yes Bank, API Banking is run as a separate P&L unit where each APIs is tracked separately. He added, “Overall API P&L has been profitable since day one. Essentially when we acquire clients on the back of API banking we get the whole operating account of the customer from collections to liquidity everything is routed through Yes Bank. Eventually if there’s a lending opportunity, we can underwrite and lend it to him. It’s a comprehensive revenue model.”Neobanks or aggregators (like Open, RazorPay X, etc.) offer small dashboard and integrated solutions to MSMEs and the banking services to these SMEs are powered by the bank’s APIs.

Rajan said, “A part of B2B2C monetisation is that this becomes a channel for retail acquisition as neo-banks are just aggregators. The fund flows and cash flows of the aggregators clients are powered by Yes Bank APIs as we have access to the clearing system. It’s a win-win situation.”

As the RBI had imposed moratorium which had impacted a major chunk of FinTech ecosystem and payment rails, Rajan added, “70% of the unicorns-soonicorns are powered by the Yes Bank APIs. We’ve recouped all our clients back post the moratorium episode, my volumes on API banking are more than pre-moratorium/pre-Covid volumes despite the lockdown effect. The new business gain has been predominantly through e-commerce, cross-border inward remittances.”

Strategy Ahead

With all the first mover advantages and significant hold in API banking space, he believed Yes Bank has never been complacent of their positioning in the space because they are practically aware that other banks have also been picking up and developing their own story of APIs.

He said, “We’ve created an API hub, as we will be the Amazon of banking, simply explained the hub will be housing all digital solutions of the bank and coupled with offerings of our partners (mostly FinTechs) integrated with our banking channel as it will also be digital acquisition channel for the bank as well as the partner. While we as Yes Bank would be offering banking services, Fintechs/Tech-fins would offer other services required by corporates and businesses like HRMS/Expense management /Cashflow forecasting, etc.”

We’ve created an API hub, as we will be the Amazon of banking, simply explained the hub will be housing all digital solutions of the bank and coupled with offerings of our partners (mostly FinTechs) integrated with our banking channel as it will also be digital acquisition channel for the bank as well as the partner. While we as Yes Bank would be offering banking services, Fintechs/Tech-fins would offer other services required by corporates and businesses like HRMS/Expense management /Cashflow forecasting, etc.Ajay Rajan, Global Head – Transaction Banking, Yes Bank

The API Hub is in the process of going live, he added, “We’ve created a sandbox environment and are doing Minimum Viable Proposition and should be able to go live soon.”

He was of the view that API Banking as a concept is what every bank on the street is talking about, as corporates have realized that if they’ve to give something to their customer they need the same efficiency from their bank which was never forthcoming. It will also allow efficiencies in terms of time, reconciliation, creating a business model which clearly is the future.

“The next decade is API banking,” he concluded.

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