What is Account Aggregator system in banking?

The Account Aggregator (AA) system is a financial data exchange where banks, fintech, or NBFCs can exchange customer data after taking consent from such users. The entities which facilitate the data exchange are known as account aggregators.

Under the account aggregator system, a lender who requests the data is called financial information user (FIU), and the one that provides the data is called financial information provider (FIP). The customer data cannot be exchanged by AA without taking customer’s permission.

The account aggregator (AA) framework facilitates sharing of financial and other information on a real-time basis and in a data-blind manner between different regulated entities. The data will be available to both the users and service providers through this mechanism.

Under the AA platform, all the data pertaining to health, medical record, present health conditions, salary information, networth information, and others can be aggregated into a single readable format. This can help the customers get better insurance premium quotations depending on the data. Under the AA system, loans may be sanctioned by the lenders on a real-time basis without waiting for several physical documents like a bank statement, salary payslip, form 16, credit bureau report, and other documents required to be processed by the lending bank. The move is expected to bring down processing costs for banks through access to better data.

However, Customers have the choice of which accounts they want to link, and share their data from one of their accounts for some specific purpose to a new lender or financial institution at the stage of giving consent through one of the Account Aggregators. It is left to the customer to or not to share the data. He can reject the consent to share requests at any time. If a customer has accepted to share data in a recurring manner over a period, he may revoke the consent later as well. The exact time period for which the recipient institution will have access will be shown to the customer at the time of consent for data sharing. RBI approval is required for providing account aggregator services, by entities.

The Account Aggregator (AA) Ecosystem which went live in September 2021 has seen active participation from Banks/NBFCs in the country. Union Bank of India, Canara Bank, Indian Bank, and Punjab National Bank are the PSB lenders who have connected to the account aggregator system. Other PSU lenders are in various stages of implementing the process of connecting to the account aggregator system. Other PSBs like State Bank of India (SBI), Bank of Baroda UCO Bank, Indian Overseas Bank, Punjab and Sind Bank, Bank of India, Central Bank of India, and Bank of Maharashtra are in various stages of implementing the process of connecting to the account aggregator system.

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