New Delhi: India, this month, unveiled the Account Aggregator (AA) network, a system for sharing financial data of a bank customer across the network, which will make it easier for the customer to share his profile for borrowing loans and availing other banking services.
The government said it would revolutionise investment and loan facilities by giving millions of customers greater access and control over their financial records and expand the pool of customers for lenders and fintech companies.
The idea is to allow bank customers to share their personal data within the system, which remained confined to only one or few financial institutions with which they had past dealings.
The government said this is the first step to bring 'open banking' to the country as a customer can share his financial data across institutions in a secure and efficient manner.
What do you mean by account aggregation?
The Personal Data Protection (PDP) Bill was introduced by the government in the Lok Sabha in December 2019. The PDP Bill defines user’s rights over his personal data and seeks to establish a Personal Data Protection Authority.
It will allow users, such as the government, and Indian and foreign companies dealing with financial data to access and use a customer’s data subject to the conditions of the bill.
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Though the bill is under consideration of a Parliamentary Committee, financial sector regulators such as RBI, SEBI, IRDAI, PFRDA came together to make a well-defined and secure approach for sharing the financial data called the Account Aggregator Framework.
More importantly, the Account Aggregators, which are non-banking financial companies known as NBFC-AA regulated by the Reserve Bank, can only extract and transfer the user data but they themselves cannot read, aggregate or store the encrypted data.
What is an Account Aggregator?
An Account Aggregator (AA) is an RBI regulated entity with an NBFC-AA licence that helps an individual securely and digitally access and share information from one financial institution he has an account with to any other regulated financial institution in the AA network.
Data cannot be shared without the consent of the individual and the user will have the right to choose the account aggregator as per his choice. It will be a granular and step-by-step permission and control for each use of an individual’s financial data.
How many Account Aggregators are there in India?
The Account Aggregator system started off with eight of India’s large banks. Four of them had already been sharing user data on a voluntary basis -- ICICI Bank, HDFC Bank, Axis Bank, and IndusInd Bank. Four others are going to be able to share such data shortly. These are State Bank of India, Kotak Mahindra Bank, IDFC First Bank, and Federal Bank.
What are the advantages of account aggregation?
A bank customer or borrower is required to comply with plenty of conditions and provide multiple documents, make agreements on stamp papers and get them certified from a notary or oath commissioner. These documents may include address proof, identity proof, bank or loan statements. Companies may seek hard copies or scanned copies as per their convenience. This creates hassles for a financial service user.
The Account Aggregator network would replace these procedures with a simple, mobile-based, safe digital data access and sharing process. This will create opportunities for new kinds of services such as new types of loan products that are currently unavailable in the market.
The individual's bank just needs to join the Account Aggregator network.
How is it different from Aadhaar based KYC?
Aadhaar e-KYC (know-your-customer) and CKYC only allow sharing of four Identity data fields such as name, address, gender, etc. Similarly, credit bureau data only shows loan history and the credit score.
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The Account Aggregator network allows sharing of transaction data or bank statements from savings, deposit and current account of a bank customer.
What kind of data can be shared?
Today, banking transaction data is available to be shared (for example, bank statements from a current or savings account) across the banks that have gone live on the network.
Gradually, the AA framework will make all financial data available for sharing, including tax data, pension 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.
Can AAs view your personal data? Is it safe?
The government says Account Aggregators cannot see your data. They only take it from one financial institution to another based on an individual's direction and consent.
Moreover, contrary to the name, Account Aggregators cannot 'aggregate', collect or store an individual's data.
AAs are not like technology companies that aggregate your data and create detailed profiles of their users and customers.
There is end-to-end encryption and the use of technology like the ‘digital signature’ makes the process much more secure than sharing paper documents.
Can a customer refuse to share data?
Yes! Registering with an AA is fully voluntary for customers. If your bank has joined the AA network, you can choose to register with an AA, choose the accounts you want to link, and share your data from one account with some other bank or NBFC for a specific purpose.
However, it will require your consent that you reject at any stage.
If a customer has accepted to share data in a recurring manner over a period, for example, for the entire tenure of a loan, you will still be able to revoke it any time in future.
How long an entity can keep your data?
The exact time period for which the recipient institution will have access will be shown to the consumer at the time of consent for data sharing.
How can you register with an AA?
You can register with an AA through their app or website. AA will provide a handle (username) which can be used during the consent process.
Currently, four apps are available for download (Finvu, OneMoney, CAMS Finserv, and NADL) with operational licences to be AAs. Three more have received in-principle approval from RBI (PhonePe, Yodlee, and Perfios) and may be launching their apps soon.
Do you need to register separately with all AAs?
No, as it will defeat the entire purpose of hassle-free data sharing. You can register with any AA to access data from any bank on the network.
Do you need to pay any fee?
This will depend on the Account Aggregators. Some AAs may be free because they are charging a service fee from financial institutions while some others may charge a small user fee.
What new services can you use?
There are two areas where services will become easier and hassle free. These are access to loan and money management or investment.
For example, if a customer wants to get a small business or personal loan, he needs to share several documents share with the lender. This is a cumbersome, time taking and manual process. Similarly, money management or investment is difficult as data is stored in various locations and cannot be brought together easily for analysis.
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Through Account Aggregator, a company can access tamper-proof secure data quickly and in an affordable manner. It will fast-track the loan evaluation process and result in reduction in loan processing fees.
Also, a customer may be able to access loan without giving a collateral, by sharing trusted information on a future invoice or cash flow directly from a government system like GST or GeM.
