Five Ways the Account Aggregator Framework Will Benefit Customers

Last month the Account aggregator (AA) framework has been launched. It is a data sharing system that will provide easy access to financial data to different parts of the financial ecosystem. AA has been a boon for individuals and small businesses as it is expected to close the credit gap in the country. It will allow lenders to make a quick and easy assessment of the borrower’s creditworthiness. This framework aims to give Indian citizens and businesses a single view of their financial data for a better financial future, anywhere, anytime.

Before we delve into the benefits of the system for customers, it is important to know how the AA framework works.

The system consists of three main components: the account aggregator (AA), the financial information user (FIU) and the financial information provider (FIP). An AA is a new class of NBFC approved by the Reserve Bank of India (RBI) to manage consent to share users’ financial data. The AA was born out of an inter-regulatory decision by several regulatory bodies: the RBI, the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority (IRDAI), the Authority of regulation and development of pension funds (PFRDA) through financial stability. and Development Council (FSDC).

FIUs, such as banks, lending agencies, and NBFCs, can receive data digitally authorized by financial information providers (FIPs). FIPs are institutions that oversee user data. Typically banks, mutual funds, pension funds, and some NBFCs are the source of personal or business data that FIUs can access through requests through an account aggregator.

The operation of the system is quite simple. In the AA application, users need to bind their FIP through which a user can share the data of that FIP ​​with a CRF. Currently only bank accounts can be linked and not all banks are active in the ecosystem yet. Later GST data, mutual fund data, etc. should also be included in the same.

While AA will make the credit risk assessment process easier and simpler for FIUs, here are some ways the AA framework is poised to benefit individual users and small businesses:

1. Consolidated dashboard: User can get an aggregated view of all their bank accounts in one place with just one click in the use case of personal financial management. In addition, the user will not have to run to collect bank documents to obtain loans or access other financial products.

2. Unique digital frame: Account aggregators allow the user to easily share data with financial service providers such as lenders or portfolio management / wealth service providers, consolidating their own data in one place and providing a unique digital framework to share them in reality. time.

3. User controlled data sharing: Data will only be shared with the consent of the user. The customer will have access to all the consents given. All consents provided by AA are also designed to be revocable. If the person revokes their consent for their personal or business data, the FIU should engage with the borrower offline to find a solution. Thus, the customer becomes the true owner of his data.

4. Simplistic control: The framework for consent is very simple. The user will always know –
a. Who is the data shared with?
b. What is the purpose of data sharing?
vs. What is the frequency and duration of consent?

Currently, only bank data can be made available through the AA system, but with the imminent integration of investment, insurance and tax data, a holistic view of the user’s net worth can be created, this which will facilitate the credit decision for lenders. As a result, improved access to credit for small businesses, which often have difficulty with documentation when applying for a loan.

5. Data security: The framework will also reduce cases of misuse of data related to shared accounts in physical form. The user can breathe easily as the shared data is encrypted and decrypted only at the end of the receiver. FIUs will need to adhere strictly to data governance guidelines that are currently being developed to prevent data misuse.

Since the system was introduced recently, only a limited number of users have yet created a handful of account aggregators. As more and more users enter the account aggregator ecosystem, more instant product and service use cases will be created for the customer. Especially for small businesses looking for loans to modernize their business, using the AA framework will be of huge benefit in increasing their competitiveness. The ultimate beneficiary is the user and, like the UPI, this account aggregation framework is expected to revolutionize the financial ecosystem in India for many years to come.

The author is CEO of NeoGrowth. The opinions expressed are those of the author.

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