Banks in India are quietly redrawing their role in the financial system. Instead of acting as closed institutions, many are becoming platforms, opening digital rails that allow fintech firms to build, launch, and scale products faster than ever before.
What began as a theory is now showing up in balance sheets, code bases, and customer journeys.
From closed banks to open infrastructure
The shift is most visible in how banks expose their capabilities.
Accounts, payments, lending, compliance checks, and data access are increasingly offered through secure application programming interfaces, or APIs. These digital connectors let third parties plug directly into regulated banking systems without becoming banks themselves.
For fintechs, this changes everything.
They can build on top of licensed balance sheets, focus on user experience and distribution, and avoid years of regulatory and compliance build-out. For banks, the model reframes their value: less about owning the customer interface, more about supplying trusted infrastructure.
Executives describe it as a move from product ownership to enablement.
Digital public infrastructure sets the stage
India’s regulatory and technology stack has been a major accelerant.
Instant payments via Unified Payments Interface continue to grow across peer-to-peer and merchant use. Account aggregation frameworks allow consent-based data sharing, reducing onboarding friction and speeding up credit assessment.
Rising smartphone penetration has done the rest.
Together, these elements have created conditions where platform-led banking can scale nationally, quickly, and at relatively low marginal cost.
As one banker put it, “the pipes are finally in place.”
APIs sit on top of old cores, not instead of them
Most large lenders have not replaced their legacy systems.
Instead, they have added API layers that sit above existing cores, separating product logic from distribution. This architectural shift allows fintechs to mix and match functions such as KYC, payments, or credit scoring, while banks maintain control over regulated processes.
The result is often described internally as plug, play, and scale.
Fintechs plug into bank rails. They play by assembling features. Then they scale across geographies without rebuilding compliance stacks each time.
Banks benefit through fee income, wider reach, and better use of capital via co-lending and embedded finance structures.
Faster launches and wider reach
Executives across the sector say platform models have compressed product launch timelines dramatically.
What once took months now takes weeks.
Early growth has been strongest in:
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Consumer and merchant lending
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Small business working capital
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Wealth and investment distribution
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Cross-border remittances
Embedded finance is also spreading into non-financial platforms. Ride-hailing apps, e-commerce firms, logistics networks, and software providers are all integrating payments and credit at the point of need.
For small enterprises, the impact is tangible. Cash-flow based underwriting, built on real-time transaction data, is reducing dependence on collateral and paperwork.
The economics behind the shift
There is a clear commercial logic.
Banks monetise APIs through per-call fees, per-transaction pricing, or revenue sharing. These create steady, repeatable income streams that behave more like subscriptions than one-off deals.
Fintechs, meanwhile, gain variable cost structures. Expenses rise with usage, not ahead of it. That alignment lowers risk during early growth and supports faster experimentation.
Analysts note that platforms with high uptime, predictable performance, and clear documentation tend to attract repeat developers. Over time, that creates network effects similar to those seen in cloud software ecosystems.
Regulation remains the anchor
Despite the openness, guardrails remain firm.
Data localisation rules, consent standards, and outsourcing guidelines shape how systems are exposed and how partners handle customer information. Supervisors have made it clear that licensed banks remain accountable for outcomes, even when services are delivered through partners.
That stance has pushed banks to strengthen vendor oversight, audit trails, and incident response frameworks. Fintechs, in turn, have had to mature governance and security practices to meet bank-grade expectations.
The platform model works only if trust holds.
Bengaluru at the center of the shift
Much of this transformation is being designed and deployed from Bengaluru, where banks, fintechs, and technology providers cluster closely.
Product teams, compliance specialists, and engineers now sit side by side, shortening feedback loops between regulation, design, and deployment.
That proximity has helped move Banking-as-a-Platform from slide decks into production systems.
A quiet restructuring of Indian banking
This is not a loud revolution.
There are no dramatic branch closures or sudden exits from legacy products. Instead, banks are layering new capabilities on top of old foundations, slowly repositioning themselves as infrastructure providers for a broader financial ecosystem.
For fintechs, the opportunity is scale without licenses.
For banks, it is relevance without owning every interface.
Together, they are reshaping how financial products are built, priced, and delivered across India.
