On September 2, over 900 fin-tech players and observers assembled for the operationalisation of India’s consent-based financial data sharing mechanism – the ‘account aggregator’ (AA) ecosystem. The consent-based financial data sharing mechanism, which was first announced in 2015, went live with a number of fin-tech firms as well as eight banks that make up 40% of India’s bank accounts according to Kamya Chandra, a fellow at iSPIRT.
The operationalisation means that financial data sharing in India is moving towards a consent-based data sharing mechanism facilitated by account aggregators which in turn also allows for the creation of unified financial records for each user. Not only financial data but the AA framework can also be used in other areas including healthcare as revealed later in this report.
What are Account Aggregators?
Revealed by the RBI first in 2015, Account Aggregators are non-banking financial companies, registered with the RBI, who will act as data access fiduciaries for citizens’ financial data.
Quite simply, this is how an account aggregator enabled financial data sharing mechanism would look like:
1) You would set up an account with one of the approved account aggregators, linking bank account details.
2) If you apply for a loan, the bank instead of asking you to provide your bank statements, income details, etc. separately, in hard copies would request for it through the account aggregator’s interface (this could be a mobile application too).
3) You select the information you would like to provide to them and tell your Account Aggregator as well.
4) With your consent, the account aggregator shares the data with the loan-issuing bank also known as a Financial Information User (FIU). Once it is shared, you will be notified of what is being done with it as well.
It is important to note that the Account Aggregator cannot store any of your data and will only provide a mechanism for your data to be sent.
Where could Account Aggregators be used?
Nandan Nilekan, Chairman of the RBI committee on deepening digital payments in India, R.S. Sharma, CEO, National Health Authority, M Rajeshwar Rao,Deputy Governor, RBI and several other members of the fin-tech industry like Nithin Kamath (Founder, Zerodha), Naveen Kukreja (Co,Founder Paisabazaar), and others, during the event, raised the following use cases:
In lending: Nilekani, Rao, and Sucharita Mukherjee (of Kaleidofin) raised the possibility of using AA for enabling easy disbursal of loans as it would create a unified source of data, eliminating the need to submit paperwork for each aspect of someone’s financial record.
Rao and Nilekani also raised the issue of MSMEs saying that these organisations encounter difficulties in getting credit as their financial information is scattered across various places. “Account Aggregators can act as an intermediary and can consolidate data including cash flow data,” Rao said.
Nilekani said that talks are also underway to get permission for telecom-data based loans. This would mean that someone could provide information about the telecom bills that they have paid and potentially receive a loan for it through the Account aggregator ecosystem.
In healthcare: Sharma said that health data privacy was a big concern at the NHA, referring to the National Digital Health Mission being built by them. On those lines, he said the authority would consider creating ‘Health Account Aggregators’ for the area but regardless the sector would see a ‘very, very heavy’ use of a similar data-sharing mechanism.
In financial advisory: Kamath, Kukreja, and Mukherjee raised the possibility that the account aggregator framework could be used for disseminating accurate financial advisory to clients. Elaborating on this, Kukreja said that previously giving accurate financial advice was difficult as the advisor could not get access to the complete financial data of a person.
So, who’s onboard?
Yesterday, it was announced that the following companies could be a part of the Account Aggregator ecosystem.
- State Bank of India, Federal Bank, Kotak Mahindra Bank, and IDFC First Bank have received approval to become Financial Information Users/Providers.
- HDFC Bank, ICICI Bank, Axis Bank, and IndusInd Bank are already live with it.
- NBFCs Finvu, OneMoney, CAMS Finserv, and NESL have received operational licenses to become Account Aggregators.
- PhonePe, Perfios, and Yodlee have received in-principle approval to become Account Aggregators
During the event, iSPIRT provided the following graphic showing entities who are working towards or are already part of the AA ecosystem.
Previously, owing to disclosures by Sahamati a not-for-profit collective of the account aggregators, we have known that the following bodies are also looking to be a part of the AA ecosystem as Financial Information Users or Providers.
- Bajaj Finserv
- DMI Finance
- Kairos Capital
- NeoGrowth Credit
- Union Bank of India
Timeline of setting up Account Aggregator framework in India
The concept of account aggregators first originated in 2014, as RBI Deputy governor M. Rajeshwar Rao also noted yesterday, when then Union Finance Minister P. Chidambaram called for the creation of a unified financial record and tasked the RBI with creating regulatory mechanisms around it.
July 2015: RBI floated the idea of developing a regulatory mechanism for a non-banking finance company (NBFC) in July 2015, to help citizens access and operate all their accounts across financial institutions in a single format.
March 2016: RBI releases draft guidelines for account aggregators and directs NBFCs to have minimum net-owned funds of Rs. 2 crore while also preventing them from providing any services other than account aggregation.
September 2016: RBI notifies final guidelines for account aggregators and says that only NBFCs registered with RBI will be allowed to undertake account aggregation. NBFCs were given 12 months to put in place the required technology and tie-ups required for aggregation.
November 2018: RBI issues in-principle licenses to five AAs after receiving applications from nine entities.
August 2019: Account aggregators perform a trial run of their services and announce that they are nearing a launch with the help of Sahamati, a collective of the account aggregator ecosystem.
November 2019: In a notification, the RBI’s announced the Technical Specifications for the Account Aggregator system.
- PhonePe gets RBI nod to become account aggregator, says more details to come
- Summary: Data Empowerment and Protection Architecture (DEPA)
- Onemoney expects six banks to on-board onto Account Aggregator system by March
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