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APIs or application programming interfaces are these little pieces of code at the endpoint of a software that allows other software to connect and communicate with it. They have brought a revolution to the Indian banking and finance industry – one that many other countries are trying to learn from – and they could do the same in healthcare and other fields.

In many cases, organisations charge a fee for their API connections, and that brings substantial revenues. In other cases, they offer APIs free, in the expectation it will help create an ecosystem that will eventually benefit everyone, including them. So profound is their influence that many now talk in terms of the `API economy’.

The government initiative called IndiaStack, which is a set of public APIs, is the finest example of this. Its Aadhaar Auth API launched in 2010 is what allows a vast number of third-party service providers today to connect to the Aadhaar database and authenticate you when you provide your biometric inputs. Its eSign API allows service providers to enable an Aadhaar holder to electronically sign a form or document anywhere and on any device. Its UPI API, in combination with a virtual payment address, enables bank account holders to send and receive money instantly from their smartphones without the need to enter bank account information or net banking user id and password. Even third party service providers can use these APIs, which is how the likes of Google Pay and PhonePe made transfers so delightful.

Sharad Sharma, co-founder of iSpirt Foundation, which has been central to building India-Stack, notes that a shared API that Aadhaar created that allows you to do KYC of an individual in a presence less but trusted manner suddenly unlocks the platform’s ability to serve the customer virtually. No other country in the world, he says, has built such a comprehensive suite of open APIs for digital financial services.

Older banks are saddled with older IT infrastructures, and cannot move very fast. So they are opening up more of their systems through APIs so that newer digital players – call them fintechs or neobanks, who have cloud-based architectures based on what are called containers and microservices – can quickly offer a variety of new services to new segments of people that older banks cannot.

“Banks have opened their APIs so that different fintechs can utilise them,” says Akash Jain, principal analyst at Gartner. Neobanks don’t have a banking license. They partner with traditional banks, and API integrations with these banks are core to their operations.

Next-gen shift

Shashank Mehta, head of RazorpayX, the B2B neobank of payments solutions company Razorpay, says the country is now seeing a next-gen shift, where apart from money movement, APIs are being used to help businesses interact with money better. Digital-native businesses, for instance, can’t afford to manage their money manually – so RazorpayX offers an easy-to-use bank account, a one-click payroll solution, and a corporate card to run ads on social media and for other purchases.

Neobank Zolve provides working professionals and students who are bound for the US with a host of financial facilities they would need, like bank accounts in the US, high-limit credit and debit cards, all without the need for a US social security number or credit history.

At the root of these are the neobanks’ connections with traditional banks. The latter also takes the big burden of compliance with RBI regulations off the backs of fintechs.

That foundational role is what players like Digio do as well. Digio enables authentication services – Aadhaar eSign and eKYC, digital signatures – for fintechs. Digio does the heavy-lifting involved in, for instance, the constant changes in KYC regulations. They have a battery of legal consultants to ensure systems are compliant. “People wanted a solution which could abstract out the technology, maintenance, as well as the compliance factor. That’s where we put out these APIs that allow any business entity to connect and pretty much create a complete digital KYC, signing and recurring payments workflow,” says Sanket Nayak, co-founder of Digio.

Zerodha too opened up its core capability of executing trades, and it does not even charge those who use its APIs. “That was a philosophical call,” says Kailash Nadh, CTO. He says technologists were not coming forward to build securities tech because of legal barriers, red tape and compliance requirements involved in a broking license.

Today, there are entire businesses built on top of Zerodha’s APIs. Smallcase, with over 2 million customers, offers tailor-made baskets of stocks people can trade in; Sensibull enables options trading; Quicko pulls people’s transactions to do taxation. An entire ecosystem is getting created that will also benefit Zerodha. For one, its demat account is an option for Smallcase customers.