Account Aggregator

Account Aggregator

Subject: Economy

Context: The eight of India’s major banks — State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank and Federal Bank  joined the Account Aggregator (AA) network that will enable customers to easily access and share their financial data

Concept:

• According to the Reserve Bank of India, an Account Aggregator is a non-banking financial company engaged in the business of providing, under a contract, the service of retrieving or collecting financial information pertaining to its customer.
• It is also engaged in consolidating, organizing and presenting such information to the customer or any other financial information user as may be specified by the bank.
• The AA framework was created through an inter-regulatory decision by RBI and other regulators including Securities and Exchange Board of India, Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority (PFRDA) through and initiative of the Financial Stability and Development Council (FSDC).

Structure

• It has a three-tier structure: Account Aggregator, FIP (Financial Information Provider) and FIU (Financial Information User).
• An FIP is the data fiduciary, which holds customers’ data. It can be a bank, NBFC, mutual fund, insurance repository or pension fund repository.
• An FIU consumes the data from an FIP to provide various services to the consumer. An FIU is a lending bank that wants access to the borrower’s data to determine if the borrower qualifies for a loan. Banks play a dual role as an FIP and as an FIU.
• An AA should not support transactions by customers but should ensure appropriate mechanisms for proper customer identification. An AA should share information only with the customer to whom it relates or any other financial information user as authorized by the customer.
• The licence for AAs is issued by the RBI
• The AA framework allows customers to avail various financial services from a host of providers on a single portal based on a consent method, under which the consumers can choose what financial data to share and with which entity.

Purpose of AA

• An Account Aggregator allows a customer to transfer his financial information pertaining to various accounts such as banks deposits, equity, mutual fund and pension funds.
• There are 19 categories of information that fall under ‘financial information’, besides various other categories relating to banking and investments. For sharing of such information, the FIU is required to initiate a request for consent by way of any platform/app run by the AA.

Advantages

• It reduces the need for individuals to wait in long bank queues, use Internet banking portals, share their passwords, or seek out physical notarisation to access and share their financial documents.
• An Account Aggregator is a financial utility for secure flow of data controlled by the individual.
• Account Aggregators are an exciting addition to India’s digital infrastructure as it will allow banks to access consented data flows and verified data.
• This will help banks reduce transaction costs, which will enable us to offer lower ticket size loans and more tailored products and services to our customers.
• It will also help us reduce frauds and comply with upcoming privacy laws. Data transmitted through the AA is encrypted. AAs are not allowed to store, process and sell the customer’s data.
• An AA creates secure, digital access to personal data at a time when Covid-19 has led to restrictions on physical interaction.