What is the Account aggregator framework?

An account aggregator (AA) is a kind of framework or ecosystem where required data has been shared for making personal and professional investments or accessing credit/finance, among other financial services. 

The central bank introduced this concept in September 2021; according to some of the renowned financial geniuses Account aggregator framework compiled with Reserve bank regulations will be a revolution in the world of digital lending. 

How the framework of the account aggregator work?

Account aggregator manages data from sources like banks, insurance and mutual fund companies. An account can be opened with any of the few AAs that are active and in operation today, and ongoing accounts like savings accounts, fixed deposits and investment schemes can be linked.

RBI account aggregator, also known as financial data aggregation, allows seamless sharing of information with the financial service providers; all the required control is given for some times only when needed and what data is needed. 

A progressive step was taken in order to help people to gain control over and take benefit from their own data. Previously you may have had various frustrating experiences with your banks regarding the submission of documents, sharing bank statements and availing of other bank services. Still, the framework of an account aggregator is easy and convenient.

 Account aggregator - A game changer?

At the time when the Reserve bank launched the Account aggregator, many big financial players had predicted that it would be a game changer in the Indian market, just like UPI. Adhil Shetty, Ceo of Bank Bazar, said UPI had been the centre of the payment revolution in India. AA, coupled with RBI guidelines, will lead a similar revolution in digital lending. 

The ministry of finance is even willing to advocate the Indian fintech industry and praise all the banks for merging with the AA framework. Credit is the primary factor involved in economic growth, as AAs are essentially non-lending NBFCs licensed by RBI. It bridges the gap between financial information providers and users- a type of design that highly prioritises customer interest. 

Similarly to UPIs, AAs will come to assist digital loan account openings where borrowers can consent to their data being shared with lenders through a digital platform. This speeds up the KYC process, reduces processing time, and diminishes the chance of fraud. More data points are evaluated to accept the borrower's amount and assure the loan. 

What impact does an Account aggregator make on Indian Fintech?

The term fintech, derived from Financial technology, is prominent in the finance sector of the country; some of the many known fintech Indian companies that you must have heard of are Paytm, Bharatpay, InCred, OneNDF etc. 

Over the years, technology has overtaken the world, and the financial sector consumer’s expectations of convenience, safety, security and simplicity have changed among all industries. If we specifically notice only the credit/fintech sector, there is a huge cutthroat competition from on-demand aggregators and marketplaces. 

Millions of customers can now access to share their financial data in a pleasing manner.  

Financial data aggregation involves compiling data of the customer from various distinct sources like a current bank account, mutual fund account and other multiple sources accessible where financial information is present like cash flow and investment-based input. This framework has enabled customers to easily share their financial information with service providers and gain control over and take benefit from their own data. 

Financial assistance to financially illiterate  

Previously financial systems have provided access to various financial services by assuring robust financial solutions to the people. When this revolutionary step of Account aggregator was taken, it reduced the gap in financial literacy. Customers will no longer get served with traditional methods of banking services. 

This ecosystem of assuring financial services is available at a lower cost and allows feasible sharing of information with the financial service providers; all the required control is given for some times only when needed and what is needed, and through that, customers can gain from their own data. 

This initiative may change the working of the fintech industry and can completely change the outlook in the upcoming few years. 

Who are the account aggregators in India? 

Non-Banking financial corporations-AA that are registered and regulated by RBI only consensually share data, and numbers are enabled between consumers and financial institutions that are available in the network. They don't have access to all the data, and also data is transferred from one institution to another only on the basis of consent and direction. The option of revoking shared data is also available.    

Parties involved in the AA network!

The network of account aggregators involves 3 participants, namely. 

1. Financial information provider (FIP) 

These are the sources through which the data is provided, like banks, tax platforms, and mutual fund providers; they provide all the person's financial data. 

2. Financial information user (FIU)

Those institutions use the received data in order to use it for customer gain only after consent.    

3. Account Aggregators (AA)

These are the RBI-regulated enterprises that ease sharing of data. 

Top Indian Banks who are in the AA network!

Prominent Indian banks that have recently catered for a customer base of 300 million have joined the AA network and are 

  • Axis bank 
  • IDFC bank 
  • IndusInd Bank
  • State bank of India
  • Federal bank 
  • Kotak Mahindra Bank
  • ICICI bank  

Conclusion 

Account aggregator is the framework implemented by the Reserve bank of India in 2021, where personal data is shared to make investments and avail credit needs. According to some predictions of financial experts, AA will become the game changer after UPI in the finance sector. Some experts also claimed that it would change the working of the fintech industry as it is coupled with central bank guidelines.

Although AA has increased the customer expectation, ease and comfort through which customers can easily share the data of all the sufficient financial platforms to the lending institution and can avail benefit. AA assures financial knowledge and assistance to one who lacks and allows feasible financial solutions to customers. 

Top registered and RBI-regulated NBFCs are the Account aggregators in India along with three parties involved in the network, namely financial information provider (FIP), financial information user (FIU) and Account aggregators (AA). Some leading Indian banks are also associated with the AA framework. 

FAQs 

1. What is the current state of fintech in India?

India is the fastest growing fintech in India, with more than 2000+ DPII-T recognised financial technology startups, and the number is still growing.  

2. Who are the 4 key stakeholders in the account aggregator network?

 Majorly involved stakeholders in the AA network are 

  • Consumers 
  • Account aggregators 
  •  Financial Information provider (FIP), 
  • Financial Information user (FIU)

3. Who is India’s first account aggregator? 

Union Bank of India is India’s first account aggregator. 

4. What is AA needed?

Account aggregators are needed to make investments or access credit, among other financial services, through individual data. 

5. Examples of account aggregators of India?

Some RBI-licensed AAs are 

  • CAMSfinserv
  • Cookiejar Technologies Pvt ltd
  •  NESL Asset data limited
  • Phonepe technologies service pvt ltd