Account Aggregator

You must have heard the phrase: data is the new oil. To be successful in today’s world, you need to have data and need to know how to use it. We are now creating ever-larger volumes of data every day and businesses have found ways to make sense of this data and make better business decisions. Even in the financial services sector, customers expect speed, security, and convenience, all of which require financial institutions to be data-driven decision experts.

The RBI has introduced something called the Account Aggregator Framework to make financial data more accessible. Account Aggregators means aggregators that collect financial information from entities storing consumer data and share it with entities requesting it. They use technology to allow a simple and secure exchange of your data between financial institutions such as banks, mutual fund companies and insurance agencies. With the Account Aggregator System, using your financial data, you can access a vast range of financial services for your personal and business needs. Your information cannot be shared without your consent.

Account aggregation is the process of collection of financial data from multiple sources into one place. Also called financial data aggregation, account aggregation goes beyond the traditional credit rating assets like credit cards or loans and covers investments and cash flow. The sources of the financial data are expenses, deposits, receipts, equity investments and tax returns among others.

When you give consent to an account aggregator, it will collect your digital financial data from your one or more accounts and share it with a financial institution providing services such as insurance or loan to you.

RBI introduced the Account Aggregator Framework in 2021 to make financial data accessible through data intermediaries, also called account aggregators. The intermediaries are required to collect financial information of users from entities called financial information providers, hold it, and share it with the entities requesting data called financial information users based on the users’ consent.

For example, if you want to apply for a loan, the lending bank or financial information user will need access to your financial statements saved at your bank side or financial information provider to check your creditworthiness. Under the Account Aggregator Framework, the process will be easy and hassle-free.

Our government has developed and introduced multiple programs to onboard unbanked citizens into the financial system. However, a sizable chunk of underserved and underbanked consumers still exists in the country and availing their financial data at low cost is one of the difficult tasks.

The account aggregator framework aims to improve the efficiency of financial services and propel financial inclusion in the country. The easy availability of the financial data of consumers will also positively impact the credit distribution and improve the ability of service providers to underwrite underbanked and new-to-credit customers.

Just as UPI transformed the way we pay, the Account Aggregator Framework can make financial services such as loans and credit facilities much more accessible and seamless for everyone in the existing digital infrastructure.

Below are some of the advantages of Account Aggregator Framework:

1. Hassle-free financial data transfer

Account aggregator makes it easy to gather data at the user’s end and submit it at the service provider’s end.

2. Real-time data update

Information for each of the synced accounts is updated in real time and made available online for reducing errors.

3.Verified data without errors.

All the financial data is delivered directly from authorised accounts to eliminate any data errors.

4.Transparent and comprehensive data aggregation

Aggregation increases transparency by helping you get a better picture of your finances. With your entire financial profile saved at one place, the service providers can gauge your needs better.

The framework allows you to gain significant control over your financial data, avail banking services at a reduced cost and benefit from the use of your data. The efficient and secure way to share financial data will also reduce transaction costs and financial fraud risk.

RBI issues Account Aggregator Licences and the technology is based on Data Empowerment and Protection Architecture (DEPA) consent layer API. For service providers, the framework will make the credit risk assessment easier, cost effective and more accessible. With more and more customers joining the ecosystem, new customer use cases will emerge as well. Even MSMEs looking for business expansion loans will benefit from the framework.