On September 2nd, over 900 fintech actors and observers gathered to launch India’s consent-based mechanism for sharing financial data – the Account Aggregator (AA) ecosystem. The consent-based financial data sharing mechanism, first announced in 2015, went live with a number of fin-tech companies as well as eight banks, which make up 40% of India’s bank accounts, according to Kamya Chandra, a fellow at iSPIRT.

Operationalization means that financial data sharing in India is moving towards a consent-based data exchange mechanism supported by account aggregators, which in turn enables the creation of unified financial records for every user. In addition to financial data, the AA framework can be used in other areas, including healthcare, as explained later in this report.

What are Account Aggregators?

The account aggregators, first revealed by the RBI in 2015, are non-bank financial companies registered with the RBI, which act as trustees for data access to the financial data of the citizens.

Image credit: Sahamati

Quite simply, this is what a mechanism for sharing financial data with an account aggregator would look like:

1) You would set up an account with one of the approved account aggregators and link the bank account details.

2) When you apply for a loan, the bank will request you through the interface of the account aggregator (this could also be a mobile application) instead of asking you separately to provide your bank statements, income data, etc. in paper form.

3) You choose the information you want to provide to them and also share this with your account aggregator.

4) With your consent, the account aggregator shares the data with the lending bank, also known as the Financial Information User (FIU). Once it is shared, you will also be notified of what is being done with it.

It is important to note that the Account Aggregator cannot store any of your data and only provides a mechanism for sending your data.

Where could account aggregators be used?

Nandan Nilekan, Chairman of the RBI Committee for Deepening of digital payments in India, RS Sharma, CEO, National Health Authority, M Rajeshwar Rao, Deputy Governor of RBI and several other members of the fintech industry such as Nithin Kamath (Founder, Zerodha), Naveen Kukreja (Co-Founder Paisabazaar) and others, while the event led to the following use cases:

When lending: Nilekani, Rao, and Sucharita Mukherjee (from Kaleidofin) raised the possibility of using AA for easy loan disbursements as it would create a unified source of data and would eliminate the need to file paperwork for every aspect of an individual’s financial records.

Rao and Nilekani also raised the issue of MSMEs, saying that these organizations have difficulty obtaining credit because their financial information is scattered in different places. “Account aggregators can act as intermediaries and consolidate data, including cash flow data,” said Rao.

Nilekani said talks are also underway about permitting telecommunications-based loans. This would mean someone could provide information about the telecom bills they paid and potentially get a loan for it through the account aggregator ecosystem.

In the healthcare system: Sharma said health privacy is a major concern of the NHA, referring to the National Digital Health Mission they built. With that in mind, he said the agency would consider creating “health account aggregators” for the region, but regardless, the sector would see “very, very heavy” use of a similar data exchange mechanism.

In financial advice: Kamath, Kukreja, and Mukherjee raised the possibility that the account aggregator framework could be used to disseminate accurate financial advice to clients. Kukreja explained this, saying that so far it has been difficult to give accurate financial advice because the advisor cannot get access to a person’s full financial information.

So who is on board?

It was announced yesterday that the following companies could be part of the Account Aggregator ecosystem.

  • State Bank of India, Federal Bank, Kotak Mahindra Bank and IDFC First Bank have received approval to become a user / provider of financial information.
  • HDFC Bank, ICICI Bank, Axis Bank and IndusInd Bank are already living with it.
  • NBFCs Finvu, OneMoney, CAMS Finserv and NESL Have obtained operating licenses to become account aggregators.
  • PhonePe, Perfios and Yodlee have received approval in principle to become account aggregators

During the event, iSPIRT provided the following graphic showing companies working towards, or already part of, the AA ecosystem.

Photo credit: iSPIRT

Before, based on disclosures by Sahamati As a non-profit collective of account aggregators, we know that the following bodies also want to be part of the AA ecosystem as users or providers of financial information.

  • Bajaj Finserv
  • DMI finance
  • Fi
  • Cairo’s capital
  • Loan card
  • NeoGrowth credit
  • Union Bank of India

Timeline for establishing the Account Aggregator Framework in India

The concept of the account aggregators first emerged in 2014, as the RBI Deputy Governor M. Rajeshwar Rao also stated yesterday, when the Union’s Finance Minister at the time, P. Chidambaram called for the creation of a uniform financial record and commissioned the RBI with the creation of regulatory mechanisms for it.

July 2015: The RBI came up with the idea in July 2015 of developing a regulatory mechanism for a non-bank financial company (NBFC) to help citizens access and manage all of their accounts at financial institutions in a single format.

March 2016: RBI announcements Draft guidelines for account aggregators and instructs NBFCs to have a minimum net worth of Rs. 2 crore, while also preventing them from providing services other than account summary.

September 2016: RBI notified final guidelines for account aggregators and says that only NBFCs are registered with RBI may carry out the account consolidation. The NBFCs were given 12 months to set up the technology and connections required for aggregation.

November 2018: RBI grants basic licenses to five AAs after receiving applications from nine companies.

August 2019: Account aggregators manage a Test run of their services and announce that they are about to roll out with the help of Sahamati, a collective of the Account Aggregator Ecosystem.

November 2019: In a notification, the RBIs announced the technical specifications for the account aggregator system.

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