Benefits of Account Aggregator Framework to Customers

Ashish M. Shaji

21 Dec, 2021

The account aggregator framework is a data-sharing system that will provide easy access to financial data to parties in the financial ecosystem. It is expected to address credit gap in the nation and also allow lenders to perform an easy and quick assessment of the creditworthiness of the borrower. The Account Aggregator framework seeks to empower individuals and businesses with a single view of their financial data for improved financial prospect.

Functioning of the Account Aggregator (AA) Framework

The system includes the following:

• Account Aggregator;
• Financial Information User;
• Financial Information Provider.

The AA is a new class of NBFC. It is approved by the RBI to manage consent for sharing of financial data of users. It came into existence owing to an inter-regulatory decision by various regulatory bodies- RBI, SEBI, IRDAI, PFRDA^[1] through Financial Stability and Development Council.

The Financial Information Users like banks, lending bodies and Non-banking Financial Companies can receive digitally consented data from financial information providers. Financial Information Providers oversee user data, and these are financial institutions like bank, mutual funds, pension funds, and some NBFCs representing source of personal or business data that the financial information users can access through requests with the help of account aggregator.

The functioning of the AA system is simple as the users in the AA app need to link their financial information providers through which a user can share data from that provider with a Financial Information User. As of now, only bank accounts can be linked and not all banks are live in the ecosystem. GST data, mutual fund data among others are also expected to be included under the same in the coming days.

How will the account aggregator framework benefit customers?

The AA is expected to make the credit risk assessment process simpler for Financial Information Users. Some of the ways in which this framework can be beneficial to individuals and small business owners are as follows:

• User-friendly dashboard

The user can have a complete view of all his bank accounts at one place and with just a click of a button in the personal financial management use case. Additionally, the user will no more need to circle around to collect banking documents in order to get loans or get other financial products.

• One digital framework

With the assistance of AAs, users can share data easily with the financial service providers like lenders, or portfolio management service/wealth service providers by bringing together his/her data at one place and by extending a single digital framework to share it in the real time.

• Sharing of data with user’s approval

No data can be shared without the user’s consent. Customer can access all consents given and all consent provided through AAs are also designed to be revocable. In case where the individual revokes his consent for personal or business data, then the FIU should connect with the borrower offline and find a solution. Therefore the customer becomes the owner of his data.

• Easy Controls

The consent framework is easy, and the user will be aware of the fact to whom the data is shared with, why the data is being shared, about the frequency and duration of the consent. As of now, only banking data can be made available through AA system. However, with the integration of investment, insurance and tax related data, a unique view of the net worth of user can be made, which will make it easier for lenders to make credit related decisions. It will ultimately improve the access of credit for small businesses who tend to struggle with documentation part at the time of applying for loans.

• Data Security

The AA framework is expected to lower cases of misuse of account related data shared in physical form and the data being shared is encrypted and is decrypted only at the receiver’s end. The FIUs need to adhere to the data governance guidelines that are now drafted to prevent instances of data misuse.

The AA framework will allow customers to get different financial services from various providers on a single portal based consent method under which consumers can select what financial data to share and that too with which entity. It allows users to control as to who can access their data and track and log its movement and reduce the risk of data leakage.

Conclusion

The Account Aggregator system was introduced recently, hence only a few users have created account aggregator handle until now. As more number of users join the AA ecosystem, more use cases of instant products and services will be made for the customer. In case of small businesses looking for loans to improve their business standard, the use of this framework will give them an advantage in terms of competitiveness. The user will benefit from it, and this framework has the potential to bring a massive transformation in the financial landscape in India.

Read our article:Eligibility Requirements and Procedure of obtaining NBFC AA License