New Delhi: Extending greater and hassle-free access to millions of customers over their financial records and expanding the potential pool of customers for lenders and fintech companies, the government has recently the Account Aggregator (AA) network. The digital framework, which was under discussion since 2016 and in beta phase for some time, will empower the individual with control over their personal financial data, which otherwise remains in silos.
As many as eight major banks including State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank and Federal Bank have joined the Account Aggregator network which will make lending and wealth management a lot faster and cheaper.
What is Account Aggregator (AA) network?
An Account Aggregator is a type of Reserve Bank 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 same network. Data cannot be shared without the consent of the individual.
The AA framework has been created through an inter-regulatory decision by RBI and other regulators including the Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority (PFRDA) through an initiative of the Financial Stability and Development Council (FSDC).
The license for AAs is issued by the RBI itself and there will be many Account Aggregators an individual can choose between.
The digital framework replaces the long terms and conditions in form of ‘blank cheque’ acceptance with a granular, step-by-step permission and control for use of all data of a customer.
How does AA network work?
The network has a three-level structure - Account Aggregator, FIP (Financial Information Provider) and FIU (Financial Information User). The framework will cut short customers' hassles such as sharing physical signed and scanned copies of bank statements, running around to notarise or stamp documents, or having to share your personal username and password to give your financial history to a third party.
It would replace all these with a simple, mobile-based, simple, and safe digital data access & sharing process.
What kind of data can be shared?
Financial data including tax data, pensions data, securities data (mutual funds and brokerage), and insurance data will be available to consumers. It will also expand beyond the financial sector to allow healthcare and telecom data to be accessible to the individual via AA.
Is data sharing secure?
Account Aggregators (banks and financial institutions) cannot see the data and just can transfer from one institution to another based on an individual's direction and consent. The data AAs share is encrypted by the sender and can be decrypted only by the recipient.
Can customers control data they want to share?
Yes. Registering with an AA is fully voluntary for consumers. They can choose to register on an AA, choose which accounts they want to link, and share their data from one of their accounts for some specific purpose to a new lender or financial institution at the stage of giving ‘consent’ via one of the Account Aggregators.