PhonePe, Tally, and NSDL have Received RBI’s in-principle Approval
In September 2021, India introduced the Account Aggregator network. It is a financial data-sharing system that has the potential to revolutionise investing and lending by offering millions of people better access and control over their financial records while also enlarging the potential client pool for lenders and fintech businesses. It began with eight of the major lenders in the country.
The Reserve Bank of India has granted in-principle authorisation to eight fintech companies to operate as account aggregators during the next one or two quarters (RBI). PhonePe, Tally, and NSDL e-governance Services are among the companies funded by Walmart.
With this, the eight entities will join the Account Aggregator (AA) ecosystem, which already has six players.
Account Aggregator Network
In September of last year, India announced the Account Aggregator (AA) network. It is a financial data-sharing system that has the potential to revolutionise investing and lending by offering millions of people better access and control over their financial records while also enlarging the potential client pool for lenders and fintech businesses.
Account Aggregator provides each person control over their personal financial information, which is often compartmentalised. This is the first step in bringing open banking to India and giving millions of consumers access to the sharing of their financial data across businesses in a safe and convenient manner.
Banks on AA network
The system was launched with eight of India’s top banks (Axis, ICICI, HDFC, IndusInd Bank, State Bank of India, Kotak Mahindra Bank, IDFC First Bank, and Federal Bank) and has the potential to make lending and asset management faster and less expensive.
Based on an Economic Times story, quite as many as 1.1 billion bank accounts, along with all significant public and private bank accounts, have now officially launched in India’s AA ecosystem, according to Sahamati, a non-profit entity that is constructing the AA ecosystem.
NBFC Account Aggregator Licence Explained
NBFC Account Aggregators are firms that facilitate data sharing among numerous financial sector organisations and operate as “consent brokers,” i.e., the intermediary data transmission among financial organisations with the user’s approval. In September 2016, the RBI issued master guidelines for a new type of NBFCs known as Account Aggregators.
What Does Account Aggregation Stands For?
Account Aggregation is the collection of financial records on an unified platform from different accounts including bank accounts, investment accounts, company accounts, customer accounts, and other finances accounts.
Account Aggregators are companies in the financial sector that share structured financial data with financial information users from financial information providers (FIP) (FIU). Users’ permission is obtained before this information is sent. Users have the authority to control and revoke consent.
Financial Information Providers (FIP): Financial entities that are governed by the financial sector and are requested to give account information of a user by another entity or individual are referred to as FIPs.
Financial Information Users (FIU) are the organisations that request or take financial information from FIP for a variety of purposes, such as market analysis, customer analysis, etc. Both groups of people and organisations are included in this. These are governed by statutory organisations such as the RBI, SEBI, IRDA, and PFRDA.
Note: According to RBI-master DNBR’s directive, the Financial Information is provided (Department of Non-Banking Regulations).
NBFC Account Aggregator
A financial organisation called NBFC Account Aggregator serves as an Account Aggregator for NBFC clients. Information on several accounts that clients have with various NBFC businesses is provided by NBFC-AA. The client account information will be presented as aggregated, organised, and retrievable data that will show the customer’s financial involvement in various NBFC products, such as mutual funds, insurance, and so on.
Transferring Financial Data
Users would be given a platform by NBFC-AA to make data payments or move financial information from different user accounts to any business that needs access to that information (FIU). Sending a request for the necessary financial information to the user through NBFC-AA Identifier can start the process of getting their consent.
Following the submission of the request, NBFC-AA will make sure that the required data is supplied only once the user’s approval has been received via the NBFC-AA app. This resembles a request for authorization to collect in a UPI (Unified Payment Interface) application quite a bit.
The information gathered by FIU can be used to provide a range of services to its clients, including credit facilities, personal financial advice, wealth management recommendations, investment offers, and even emerging financial services like Robo banking, which uses artificial intelligence to operate. The users who register their accounts with NBFC-AA have the only authority to approve or disapprove the sharing of the account data stored by such accounts in any FIP. Additionally, users may decide whether or not they want their data to be exported in an organised manner.
Here are five things that AAs may make easier for you by conserving time and money.
5 Cases for Account Aggregators to Be Used
1. Managing Wealth: People invest in many forms of financial assets via a variety of applications. With the user’s permission, an account aggregator platform may assist in combining all the information linked to financial assets into a single readable document that can be distributed to any service provider.
“What an account aggregator platform will do is pull through all of these various asset data and compile them in a single readable format so that they can be shared with pertinent financial institutions and then a thorough analysis can be done without the need for physical statements of all of these various assets, according to the account aggregator platform. According to Nageen Kommu, CEO and Founder of Digitap, a software business that offers AI-driven solutions for the financial industry, this can save a significant amount of time and money.
2. Taking Loans: Currently, the lending bank must review a number of papers before making a loan, including a bank statement, pay stubs, form 16, and other paperwork.
According to Nalin Agrawal, Director of Snapmint, a fintech NBFC that is live with the account aggregator framework, “With the customer’s permission, banks and other lending NBFCs can obtain information about the customer’s net worth, investments, and other financial data. By combining this information with the credit bureau report (if available), they can offer a loan with a lower interest rate because they now have access to the customer’s additional financial information, including investments, assets, and other items.
3. Monitoring Spending: People frequently make little discretionary purchases, such as purchasing movie theatre popcorn or taking a taxi to work. Over time, even modest costs might add up to a sizable sum.
Agrawal continued, “Having a single-window viewing of all the financial data, including expenses data aggregated from different banks at one place, may help consumers get a better understanding of which things they are spending the majority of their income on and, consequently, help them in better managing those.”
4. Maintaining Health Records: Additionally, AA can assist you with keeping all of your medical records in one location.
Each and every Indian citizen will receive a digital health ID card as part of the Ayushman Bharat campaign. The AA platform will now be able to give a consolidated picture of a user’s previous and present health-related data once this health data has been integrated with it. Due to the availability of additional information, Kurhe continued, “health tech businesses, diagnostic centres, hospitals, and others may access their patients’ whole health data (with their agreement) in a single readable consolidated format and deliver a faster and better diagnostic to the issue.
The Ayushman Bharat project would provide each Indian citizen with a digital health ID card. It will be feasible to provide a comprehensive view of a user’s previous and current health-related data if this health data is connected with the AA platform.
5. Buying Insurance: Keeping track of your health records makes it easier to get life and health insurance. The financial underwriting of a customer’s insurance policy by an insurance company is dependent on a variety of criteria, including the customer’s prior medical history and family medical history.
“With the user’s permission, all information on the user’s health, medical history, current health issues, salary, net worth, and other factors can be combined into a single, legible manner. According to the data, this can help clients receive more accurate insurance premium estimates, and it can also assist insurance firms in better underwriting the aforementioned policy, according to Kurhe.
The path will be considerably smoother for people once all relevant entities are on it.