Everything You Should Know About Account Aggregation Network 

India introduced a new technological infrastructure known as an account aggregator (AA) at a virtual event beginning in September 2021. Eight major banks joined the AA network immediately after announcing that it would transform how financial information about individual and business clients could be accessed. These included the State Bank of India, ICICI, Axis, IDFC First, Kotak Mahindra, HDFC, IndusInd, and Federal banks.  

Who Is an Account Aggregator?  

The Reserve Bank of India defines Account Aggregators as non-banking financial institutions that have obtained the required licences (under contract) to retrieve and collect financial information about their customers. It shares those data consensually across institutions and gives customers better control over their financial reports. Anumati AA is one of such reputed account aggregators in India, which has created a substantial impact in the finance space and is popular among users.   

Almost all of India’s significant financial oversight boards participated in the formation of Account Aggregators, which was led by an inter-regulatory body at the RBI (FSDC). Here are those boards:  

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Securities and Exchange Board of India (SEBI)  

Pension Fund Regulatory and Development Authority (PFRDA)  

Insurance Regulatory and Development Authority (IRDA)  

Financial Stability and Development Council  

What Does an Account Aggregator Do?  

The current version of Account Aggregators in India gives customers streamlined access to numerous financial institutions through a single portal. It gives them better control over the information they share with institutions based on a consent-sharing method. Account Aggregators were initially designed to reduce the growing threat of financial fraud. An account aggregator’s role is to facilitate the easy transfer of consumers’ financial information between institutions, to put it simply.  

Uses and Benefits of Account Aggregator Network  

Here are some specific examples of the ways that the Account Aggregator network helps people, MSMEs, and fintech companies alike.  

Secure and faster data processing  

The many time-consuming procedures would become hassle-free, such as signing, scanning, notarising, stamping, etc., of the papers before sharing or physically mailing them. Additionally, critical tasks like disclosing your personal login information for your accounts or financial information to a third party become more secure. The exchange of all financial data, including transactions, bank statements, different bank accounts, tax data, pensions data, securities data (mutual funds and brokerage), insurance data, etc., is made easier by the Account Aggregator Network.  

Increased Control Over Data  

They would be replaced by a mobile-based, safe, and digital sharing method, making data exchange simpler and more secure and opening the door for new financial products. Financial and non-banking financial institutions have long been adept at gathering and safeguarding the private financial information of their clients. In the absence of oversight, these institutions frequently acted as owners rather than custodians of this information, and clients often had no way to access it for themselves. This practice predates the development of account aggregators.  

With the introduction of account aggregators, the RBI hopes to change that by giving the end user greater access to and control over their financial information, including the ability to choose who to share the data with and for how long, as well as to decide which information can be evaluated and which must be kept private.  

Improved Financial Inclusion  

Not to mention, financial institutions all over the nation, specifically FIPs, now have simplified access to a wealth of customer financial information that you can use to identify the right target customers and instantly verify their eligibility for financial instruments advancing the goal of financial inclusion.  

Take an example to better grasp the significance of these advantages in their whole context. Assume you are a young professional (age 26) who works for an MNC and makes Rs. 60,000 per month in cash. Before this, you were a freelancer and found it challenging to secure loans, credit cards, and other financial instruments despite having a comparable salary. This was because there was a lack of coordination between financial institutions and an excessive flow of information.  

With the advent of account aggregation all you need to know that, you may now share your financial data with lenders at the touch of a finger and have smooth access to your financial data from FUPs (bank, income tax agency, IRDA, etc.). You can choose which information to disclose and how long the FIU (lenders, personal finance assistants, and robot advisors) will have access to it.  

You can now share your last three years’ ITR reports with your lender at the touch of a few buttons, together with the most recent investment summary from CAMS, insurance investments, and liquid cash from your banking partner. After analyzing all this data, your lender may instantly confirm your eligibility for a loan (both large and small tickets) because they now have access to broader eligibility checks. Once your loan has been granted, you can also remove the FIU’s access to the data.  

Ultimately, you have complete control over your data and are instantaneously accepted for a loan or credit card—things you previously had to fight for.  

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Financial Empowerment of MSMEs  

AAs are the finest platforms for MSMEs to help them with greater visibility and clarity regarding their eligibility to receive the credit. Collectively, they struggle with this credit gap and difficulties obtaining formal credit. Out of the 63.3 million MSMEs in India, 10% have access to formal finance, according to the 2019 study “Wider Circle” by PwC and FICCI. This is because their financial data is not readily accessible, and the AAs architecture can improve its accessibility.  

Why Do We Need AAs? 

The AA framework may assist in better addressing urgent financial needs such as small-size loans for MSMEs and affordable microinsurance with improved access to data. So far, the framework has been used by HDFC Bank, Axis Bank, and IndusInd Bank to offer vehicle loans and manage personal finances. According to reports, PhonePe, Perfios, and Yodlee have all received in-principle clearance, while four NBFCs—Finvu, OneMoney, CAMS Finserv, and NESL—have received operational licences.   

Account aggregators can undoubtedly transform how financial institutes access the critical financial data of the users. It has also revolutionized how MSMEs seek credit and how the data processing has become more swift. With each coming day, AAs will have a more user base and register financial entities to turn India into a secure, global lending ecosystem.