BENGALURU: With all the public sector banks joining the Account Aggregator (AA) ecosystem, individual borrowers can share their data with ease and all financial data can be consolidated under a single view.
In September 2021, the financial data-sharing system (AA network) was launched, as this helps customers in many ways- from providing data security to personal finance management.
“The Account Aggregator (AA) framework is a platform that enables the sharing of a customer’s financial data between licensed organisations within the AA ecosystem, subject to the customer’s consent,” says Sumit Gwalani, co-founder, Fi.
For instance, customers without a formal credit history find it difficult to get favourable loan terms. But with immediate access to a customer’s income and bill payment data, lenders can make faster and more accurate credit assessments.
Gwalani adds that having multiple bank accounts can result in a fragmented picture of overall balance and expenditure. Linking these accounts together through the AA framework can give account holders a comprehensive view of their finances in one place.
The AA, the Financial Information Provider (FIP) and the Financial Information User (FIU) are the main participants of the AA ecosystem. According to Sahamati, an industry alliance formed to promote the AA ecosystem in India, 1.1 billion accounts are live on the AA framework.
From just 180 million in September last year, the number of accounts has reached 1.1 billion in August 2022.
FinBox was one of the first fintech companies to go live on the AA framework last year. It analysed six months of data post AA integration and found that financial statement fraud dropped by 45% after the company integrated the AA framework into its risk assessment solution.
In the six months preceding FinBox’s integration, the percentage of overall fraud detected in financial statements stood at 11.04%. At present, the overall percentage of fraudulent uploads fell to 6.4%.
Individuals can have complete control over how their data is being used and shared. “AA also removes the requirement for physical collateral in many cases. Financial information drawn from AAs can help cross-check alternate data collected from a borrower’s device,” explains Rajat Deshpande, co-founder and CEO of FinBox.
Direct benefits for customers
The USP of this framework is that the financial data of customers, which is spread across multiple banks, insurers, mutual funds and other institutions can now be consolidated under a single view on a digital framework, says Sameer Shetty, President and Head - Digital Business and Transformation, Axis Bank.
In a regular scenario, there is significant effort involved, wherein customers have to share their banking data with other banks / financial institutions using hard copies or pdf documents. However, with the AA framework, it is very easy for customers to share information either one time or on an ongoing basis for a defined period of time. The framework also allows customers to revoke their consent at any point of time, he adds. At present, around 0.93 million consents have been given.
According to Sahamati, there are 162 participants in various stages of implementation. Apart from banks, there are insurance companies such as Max Life Insurance, HDFC Life Insurance, Bajaj Allianz, and NBFCs such as Amros Commercial, Lendingkart Finance and Cars24 Financial Services.
In India, there is a huge untapped opportunity in the MSME space. “There is roughly Rs 40 lakh crore credit demand gap. If we compare with our peers, we are having lowest household debt penetration,” says Ashok Jasani, VP, Head - Strategic Initiatives, Motilal Oswal Home Finance limited.
The US has 75% of debt to their GDP and we have just 11%. Even Brazil has 28% and China 56%. Similarity or exact correspondence between different AA/OCEN (Open Credit Enablement Network) can help reduce credit demand gap, Jasani added.
Points to be noted