2 min read
July 5, 2023

API in Banking: Fueling Profitability for NBFCs

Non-Banking Financial Companies (NBFCs) have emerged as key players in addressing the financial needs of underserved individuals, filling the gaps left by traditional banks. Recent regulations and rising borrowing costs have prompted NBFCs to focus on niche target segments, offering innovative and personalized financial products. The adoption of new technologies and digitalization has propelled the rapid growth of NBFCs in India, with the lending industry projected to reach an optimistic $100 billion by 2023.

The Rise of Fintechs and Digital Transformation in the Lending Segment

The advent of fintech startups has revolutionized the lending landscape, redefining various sub-processes of the lending cycle, including loan applications, origination, management, debt recovery, and customer service. Through digitization, the reliance on traditional factors such as salary slips has diminished. Instead, digital footprint data across segments and channels now form the basis for loan eligibility assessment. This transformation has made loans accessible to gig workers and young professionals without a conventional credit history.

The Need for Technological Advancements in NBFCs

To further drive growth and enhance customer experiences, NBFCs must embrace technology-based advancements. Seamless KYC verification, easy loan disbursal, efficient collections, and real-time reconciliation are essential areas that require innovation. The potential for technological prowess in this domain is vast and largely untapped.

Leveraging the Power of Lending APIs and Verification APIs

Application Programming Interfaces (APIs) have emerged as a game-changing trend in the banking and financial services industry. APIs allow NBFCs to securely share data with third-party applications, fostering collaboration and innovation. By adopting APIs, NBFCs are transforming their operations and meeting the evolving demands of customers. The global API management market is projected to reach $6.2 billion by the end of 2024, underscoring the significance of APIs in shaping the future of financial services.

Key Benefits of Lending APIs and Verification APIs

  1. Seamless KYC and Onboarding: APIs enable NBFCs to streamline KYC verification processes and simplify customer onboarding, resulting in a frictionless experience for borrowers.
  1. Account Opening and Payment Solutions: Banking APIs facilitate the swift opening of virtual accounts, savings accounts, and business accounts, while also enabling seamless fintech payments and debit card issuance.
  1. Launching BNPL Products: APIs empower NBFCs to introduce innovative Buy Now Pay Later (BNPL) products, catering to the changing preferences of customers and fostering business growth.
  1. Enhanced Customer Engagement and Retention: By leveraging APIs, NBFCs can deliver personalized services, ensuring high customer satisfaction, and driving customer loyalty and retention. 


Traditional lenders often rely on large, physical processes to assess loan applications. This can lead to creditworthy people being denied loans due to demographic issues, such as their race, gender, or income level. APIs can help to address this problem by digitizing the lending process and allowing for the use of non-conventional data points. This can give lenders a more comprehensive view of a borrower's financial situation and make it more likely that they will be approved for a loan.

As a result, APIs can help to make lending more inclusive and equitable while also helping them make better lending decisions and reach a wider pool of borrowers.

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