How account aggregator framework helps borrowers, Banks, and Money Managers?

With the account aggregation solutions, the user doesn’t have to physically provide hard copies of documents from various financial information providers like Banks/NBFCs, Mutual Fund Houses, and Insurance companies to various users like cash flow based lenders, personal finance managers, wealth managers, and Robo advisors in a secure and effectual manner. Through AA all financial data available for sharing, including tax data, pensions data, securities data (mutual funds and brokerage), and insurance data will be available to users.

An Account Aggregator (AA) is a type of NBFC-AA licensed entity regulated by RBI which shares digitally signed and encrypted data of customers from one financial institution to other network financial institutions in a secure and efficient manner. The system can make lending and wealth management a lot faster and cheaper. The system would replace sharing physical signed and scanned copies of bank statements, hard copies of documents from various financial information providers with a mobile-based, simple, and safe digital data access & sharing process. As a result, it replaces the long terms and conditions form of ‘blank cheque’ acceptance with gritty, step-by-step permission and control for each use of customer’s data. It empowers individual consumers with control over their personal financial data, which otherwise remains in silos.

Contrary to the name account aggregator cannot aggregate customers’ data like technology companies that aggregate customer’s data and create a detailed profile. AAs enable consumers to selectively share & even revoke data once shared. AAs have a fiduciary duty to their consumers while sharing digitally signed and encrypted data between them. They just act as an interoperable consent Manager. They either cannot read consumer data or resell consumer data to others.  The data AAs share is encrypted by the sender and can be decrypted only by the recipient. The end-to-end encryption and use of technology like the ‘digital signature’ makes the process much more secure than sharing paper documents.

AA can share information from one financial institution to any other regulated financial institution in the AA network categorically on an individual’s direction and consent.

How does it work?

It is a voluntary process for a customer to register with an AA through an app or website. Currently, four apps are available for download viz. Finvu, OneMoney, CAMS Finserv, and NADL have operational licenses to be AAs. Three more entities such as PhonePe, Yodlee, and Perfios have received in-principle approval from RBI. They are expected to launch their app soon. A customer can register with any AA to access data from any bank on the network. 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.

Benefits for a customer joining a AA network:

The customer who wants a credit facility requires sharing many records demanded by the lender to avail of the facility. If the borrower has to manually submit requisite papers, it would take time to avail of the loan. Through Account Aggregator the lender entity can access tamper-proof secure data quickly and cheaply and fast-track the loan evaluation process so that a customer can get a loan. Besides, a customer may be able to access a loan without collateral security of immovable property or other physical security, by sharing trusted information on a future invoice or cash flow directly from a government system like GST or GeM (Government e-Market). Likewise, money management is difficult at present because data is stored in many different locations and cannot be brought together easily for analysis.

India recently unveiled the Account Aggregator (AA) network. There will be many account aggregators. The individual’s bank just needs to join the Account Aggregator network for sharing and receiving data. Eight banks namely Axis, ICICI, HDFC,  IndusInd, State Bank of India, Kotak Mahindra Bank, IDFC First Bank, and Federal Bank have already joined the network. The first four are already sharing data based on customers’ consent and the remaining four will be shortly able to share their customers’ data with customers’ consent those data cannot be shared without the consent of the individual.

At present banking transaction data like SB account and Current account statements are being shared across the banks that have gone live on the AA network. Slowly the AA framework will make all financial data available for sharing, including tax data, pensions data, securities data (mutual funds and brokerage), and insurance data will be available to consumers. It will also expand beyond the financial sector to allow healthcare and telecom data to be accessible to the individual using the AA network.