Last week, the Indian government unveiled a new financial data sharing system called the ‘Account Aggregators’ (AA) network. This new system could revolutionise the financial data sharing system in the country with regard to investment and credit. It was introduced with the intent of giving consumers across the nation greater access and control over their financial records, while simultaneously expanding the pool of customers for lenders and other fintech companies. Without the presence of account aggregators, the information is not as accessible and often remains in silos. This approach would be a step in the direction of bringing in the open banking system in India with a greater deal of digital integration. For now, though, the account aggregator system was kicked off with eight of the country’s largest banks and it can make lending as well as overall wealth management a smoother process.
Account Aggregator System Explained: How It Works
An account aggregator is essentially a system or entity that comes under the purview of the Reserve Bank of India (RBI). This entity also carries an NBFC-AA license. The crux of this system is to enable customers to access their financial information through digital media in a secure fashion. This information can then be shared out from one financial institution to another that is within the same AA network. Additionally, the data can’t be shared without the individual whose information that is, giving their consent. In fact, the individual’s permission has to be taken for each use of the financial information throughout the entire process. It’s a step-by-step endeavour.
How can Account Aggregators Help Manage your Financial Affairs?
The financial system as it stands is a cumbersome process at best. Sure, there have been improvements by the way schemes, payment gateways and higher levels of mobile phone penetration that have enables increased digital mobility. However, there are still aspects of day-to-day finances that are physically exhausting. Getting documents notarised, printing bank statements, standing is a long cue for what should be a 10-minute work are some of these frivolous exercises. The AA network basically eliminates all that excess and streamlines the process with a simple, mobile-based data accessing system with an equally secure sharing process.
For this to happen, however, the bank the customer belongs to, has to join the AA network. As of now, a total of eight banks have joined the initiative. From these eight banks, four of them are already in the process of actively sharing data through the consent-based system. These banks are Axis Bank, ICICI Bank, HDFC Bank and IndusInd Bank. The other four banks, State Bank of India, Kotak Mahindra Bank, IDFC First Bank, and Federal Bank will be joining the ranks soon.
Is Account Aggregation Software Secure?
Through the use of account aggregators, customers can share transactional data as well as bank statements of their savings accounts or current accounts. With time, as the network and the facilities improve, a more diverse range of data can be shared such as tax data, pensions data, securities data (mutual funds and brokerage) and even insurance data to name a few. There are also plans for it to expand into the healthcare sector and telecom data arena. With all this information out there ready to be shared, it is only natural to have some doubts.
However, it should be noted that the account aggregators cannot see the data, they are simply the delivery mechanism and they can’t ‘aggregate’ the data as the name suggests. The entire process has end-to-end encryption for privacy and security.
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