What is the News?
State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank and Federal Bank have joined the Account Aggregator(AA) network that will enable customers to easily access and share their financial data.
What is an Account Aggregator(AA)?
Account Aggregator is a non-banking financial company that simply facilitates sharing of financial information in a real-time and data-blind manner between regulated entities.
The licence for Account Aggregators(AAs) is issued by the Reserve Bank of India(RBI).
How does it work?
Account aggregator systems will act as an intermediary to collect data from Financial Information Providers (FIP) like Bank, NBFC, mutual funds that hold the consumer’s personal financial data. They share that with Financial Information Users (FIU) like the lending bank that wants access to the borrower’s data to determine if the borrower qualifies for a loan. Banks can play a dual role – as a FIP and as an FIU.
However, for sharing customer data, the bank or financial institution will have to take the customer’s consent.
Benefits of Account Aggregator
Customers: 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.
Less Physical Interaction: AA creates secure, digital access to personal data at a time when Covid-19 has led to restrictions on physical interaction.
Reduction in Frauds: It also reduces the fraud associated with physical data by introducing secure digital signatures and end-to-end encryption for data sharing.
Source: This post is based on the article “Account Aggregators: new framework to access, share financial data” published in Indian Express on 7th September 2021.