Understanding Account Aggregator Framework (AA) from end consumer’s perspective

img

So, do check out with the applications of the Account Aggregators and register yourself to access the large pool of consented, and controlled data sharing platform which could help you do the business or access credit with ease, comfort and timely.

 Introduction:

 

Mr. Sampath, who was working as a manager in a factory, had to run pillar to post to collect his financial documents including bank statements from his multiple banking partners to arrive at his financial position in order to look for a housing loan. From last many years, Mr. Sampath also had to approach all his banker’s and Mutual funds advisers to arrange for him his financial records in order to file his Income Tax return.

 

A situation similar to Mr. Sampath, we also face in our day to day lives, we have to approach our multiple financial services providers viz., Banks, NBFCs, Stock Brokers, Agents etc. to consolidate our investments and loan position.

 

This particular issue has been the pain points for many especially in accessing credit, making investments and having a consolidated status of our financial relationship across the financial eco-system. However, with the advent of Account Aggregator Framework (AA), there will be comprehensive data sharing mechanism among the players with your consent to facilitate smooth of various services such as investment, credit and many more.

 

Do we really need the Account Aggregator Framework in India?

 

The answer is Yes. Account Aggregators give customers’ the potential to share data easily between different financial service providers, by consolidating data in one place and providing a single digital framework to share it in on a real-time. No more running around collecting documents to open accounts, file for taxes, get loans or ac basis.

 

AA framework is safe, consent-based framework giving you control over your data and quicker access to financial services, which means Mr. Sampath would no longer need to run door to door to his lenders to access his transaction data. Mr. Sampath can easily use the AA infrastructure to access his details of transaction using consent mechanism, which is very safe and secure and transaction with ease.

 

As a customer what I should know about AA framework?

 

As a customer you have following advantage to access your financial records using the AA framework:

 

1.       User- controlled data sharing

 

2.       Unified consent management

 

3.       Frictionless means to move data

 

4.       Real-time access to financial services

 

As a customer you should also know that, under the account aggregator:

 

1.       AA acts as a conduit and does not process the user’s data.

2.       AA is ‘data-blind’ as the data that flows through an AA is encrypted.

3.       AA can’t store any user’s data preventing potential leakage and misuse

 

In today’s world, when Regulator across the globe is harping on the fact that data localization and data privacy are important deciding factors, Mr. Sampath need not to worry using the AA framework, as AA is recognized by Reserve Bank of India and to operate as AA, they need to meet the security standards.

 

How would Account Aggregator Operate in India?

 

Account Aggregators are registered with the RBI (the Apex Bank in India) and they share customer data securely between Financial Information Providers (FIPs) and Financial Information User (FIUs).

 

·       Financial Information Providers (FIPs): organisations that hold your financial data — e.g banks, insurance companies, mutual funds, pension funds, etc.

 

·       Financial Information User (FIUs): organisations that consume financial data to provide consumer services — e.g. banks, lending agencies, insurance companies, personal wealth management companies, etc.

 

An Account Aggregator will facilitate the process of consent. AAs will be used to transfer financial data from FIPs to FIUs. Mr. Sampath can very well construe that the Account Aggregators are very much like central data registry which helps share between two parties under a consent without storing it.

 

 Source – MoF, GOI, India

 

Do I get empowered as a Customer, If I use Account Aggregator framework?

 

The answer is Yes. the Account Aggregator (AA) network, a financial data-sharing system that could revolutionize investing and credit, giving millions of consumers greater access and control over their financial records and expanding the potential pool of customers for lenders and fintech companies. Account Aggregator empowers the individual with control over their personal financial data, which otherwise remains in silos.

 

As per Ministry of Finance, Government of India, Account Aggregator framework is a first step towards bringing open banking in India and empowering millions of customers to digitally access and share their financial data across institutions in a secure and efficient manner.

 

It is not to be forgotten; the Government has taken up numerous steps to facilitate digital transaction under digital India initiatives. There are numerous examples of it such as UPI (a virtual payment address, bank to bank smooth transfer mechanism), extending the Central KYC (cKYC) for non-individuals etc.

 

Source – MoF, GoI, India

 

Last but not the least, here are the Top 7 steps Mr. Sampath and we all as a customer should know about and note about the Account Aggregator Framework, which could revolution in the banking and fintech space – by enabling smooth digital loan and investment possibilities especially moving from traditional based credit evolution to a Cash flow-based credit evaluation and loan disbursements.

 

1) Is my data safe - Account Aggregators cannot see the data; they merely take it from one financial institution to another based on an individual's direction and consent. Contrary to the name, they cannot 'aggregate' your data. AAs are not like technology companies which aggregate your data and create detailed profiles of you.

 

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.

 

2) Registering with an AA is fully voluntary for consumers.

 

3) How do I register with an Account Aggregator - You can register with an AA through their app or website. AA will provide a handle (like username) which can be used during the consent process.

 

 

 

Today, four apps are available for download (Finvu, OneMoney, CAMS Finserv, and NADL) with operational licenses to be AAs. Three more have received in principle approval from RBI (PhonePe, Yodlee, and Perfios) and may be launching apps soon.

 

4) A customer can register with any AA to access data from any bank on the network.

 

5) Is AA services chargeable - This will depend on the AA. Some AAs may be free because they are charging a service fee to financial institutions. Some may charge a small user fee.

 

6) An Account Aggregator (AA) is a type of RBI regulated entity (with an NBFC-AA license) that helps an individual securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution in the AA network. Data cannot be shared without the consent of the individual.

 

7) The Account Aggregator framework was introduced to make sharing financial data easier, quicker and more secure. This idea first showed up in government policy in 2016, when the Reserve Bank of India issued a Master Directive to introduce how AAs would work and be regulated.

 

Conclusion:

So, do check out with the applications of the Account Aggregators and register yourself to access the large pool of consented, and controlled data sharing platform which could help you do the business or access credit with ease, comfort and timely.

 

Remember that, it is not only easy of doing business but also ease of living.

 

************************ 

 

How Ananta can help?

 

Ananta Offers comprehensive advisory services for Incorporation, Acquisition and Compliances for NBFC. Ananta has been co-founded by team of experts with extensive experience with Banks and NBFCs.

 

PS. The content of the article is written based on the industry research and personal professional experience. Views expressed by the author are his personal views and doesn’t represent views of his present or previous employers.

 

 

Disclaimer – Any resemblance of name, place of any individual in the article is purely coincidental and not mean to be specifically addressing to any specific individual.