Managing finances when people have multiple accounts, loans, and payment apps can seem complex. Account aggregators (AAs) make financial management easier by using tools that consolidate financial data from multiple sources into a single, easy-to-use platform.
What is an account aggregator?
AAs are a category of NBFCs regulated by the central bank and act as a secure bridge between financial information providers (FIPs) and financial information users (FIUs). They aim to facilitate the exchange of financial data between the two entities, seamlessly and with express consent.
“Account aggregators play a critical role in improving financial decision-making by providing a comprehensive overview of an individual’s financial health. For lenders, account aggregators improve credit risk assessment, ensuring that loan approvals are based on accurate and holistic financial data,” said Rishabh Goel, Co-Founder and CEO, Credgenics.
AA Number
Up to 15 AA have operating licenses and three AA are in principle awaiting operational approval.
How do AAs work?
The AA framework works on a simple principle:
User Registration: An individual or company registers with an AA.
Consent management: When a FIU requires access to user data, it sends a request through the AA.
User Authorization: The AA presents this request to the user, who can then grant or deny consent for specific data to be shared.
Data Recovery: If consent is granted, the AA obtains the required information from the relevant FIPs.
Data transmission: The AA securely transmits the data to the FIU without storing it.
Banks require bank statements to process loans and ensure the creditworthiness of borrowers. However, all bank statements are different and processing them is complicated. “A ML solves this problem by offering a uniform data structure for all banks and accounts, and since the information comes directly from the banks, the risk of it being wrong is also eliminated,” said Rajat Deshpande, CEO and co-founder of FinBox.
How account aggregators help people
With an AA, you can easily access all of your financial information across multiple institutions in one place. This can include bank accounts, insurance policies, and investments. You no longer need to log into multiple platforms or visit multiple institutions to get your financial data.
The AA framework gives you complete control over your financial data. You decide which entities can access your data, for how long, and for what purpose. This transparency and control align with the principles of the Digital Personal Data Protection Act (DPDP) 2023, ensuring that your data is shared only with explicit and informed consent.
By allowing you to securely and easily share your financial data with financial service providers (FIUs), AAs can help you access a wide range of financial services more efficiently. For example, when applying for a loan, the lender (FIU) can quickly access your financial history from multiple sources (FIP) through an AA, potentially speeding up the approval process.
AAs are regulated by the Reserve Bank of India (RBI) and must follow strict guidelines to protect your data. While they allow for an encrypted flow of data, AAs are data-blind consent managers. The ecosystem is designed to ensure that your data is shared securely and encrypted, minimizing the risk of data breaches or misuse.
BG Mahesh, CEO of Sahamati, explained the care that needs to be taken when sharing AA consent with a service provider.
“When sharing your AA consent with any financial services provider, it is critical to carefully review the data usage terms presented in the consent template. Pay close attention to details such as the purpose of data collection, the specific types of financial information being requested, the range of data, whether the data will be obtained on a one-time or recurring basis, and how long the service provider can use the data (data lifespan),” she said.
First published: August 27, 2024 | 17:01 IS
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