Financial empowerment through account aggregation in India

The way people manage their finances in India has changed as a result of account aggregation, an innovative financial service that has experienced tremendous growth in recent years. The simplest definition of account aggregation is the safe and secure blending of a user's financial information from numerous accounts housed across multiple banks or financial institutions onto a single platform. This aggregation process is made possible by combining application programming interfaces (APIs) and other cutting-edge technology, which ensures precise and real-time data synchronisation. The process of account aggregation in India offers a variety of advantages. In the beginning, it offers users a thorough picture of their financial situation, enabling them to keep track of all of their accounts—including bank accounts, credit cards, loans, investments, and more - in one location.

Why should people be aware of account aggregation in India?

Streamlining account access for account holders, account aggregation in India can be a beneficial tool for financial management and planning. Since the statements provide a more thorough view of the family's financial holdings, aggregating accounts can be especially advantageous for households with several financial objectives, such as saving for retirement and college.

All kinds of savings, checking, brokerage, and other accounts held by the members of a specific household are linked in a process known as householding, which is a type of account aggregation. A household account is a tool that married couples can use to manage their joint finances and advance their financial objectives.

What is the working procedure for account aggregation in India?

An individual or company first creates an account using an account aggregator. Then, they link their bank accounts, insurance policies, and other accounts that contain the customer's financial data to establish a funnel for that data.

Second, a client can grant permission for a lender to view their financial information via the NBFC-AA. This typically occurs when a customer is seeking a loan or any other financial product that calls for gathering their financial data.

Third, the account aggregator asks for permission from the respective financial data providers to access the customer's data after the customer has given their consent. Finally, the data is forwarded to the account aggregator, enabling lenders to more accurately assess the customer's financial profile and risk when offering loans.

What role does the Reserve Bank of India play in account aggregation in India?

In India, companies referred to as Account Aggregators are granted licences by the Reserve Bank of India (RBI). With their consent, this cutting-edge system of account aggregation in India aims to gather all of their financial data in real time and then provide it to financial institutions. It is predicated on the concept of a Unified Payments Interface (UPI), which has changed banking in numerous ways and is intended to make bank borrowing easier.

Giving clients more control over their loans is expected to significantly alter the dynamic between borrowers and lenders and democratise lending.

How would a person’s life be improved by the new network of account aggregation?

In the present day, Indian consumers encounter numerous inconveniences concerning the financial system, such as the need to share physical paperwork, submit signed and scanned bank statements, and engage in the cumbersome process of notarising or stamping documents. Additionally, they often find themselves compelled to divulge their unique usernames and passwords to third parties in order to access and share their financial history. However, all these hassles can be replaced by the seamless, mobile-based, and secure digital data access and sharing method offered by the Account Aggregator network.

Acquiring, compiling, and disseminating financial data for obtaining products like loans or credit cards currently demands significant time and money, as individuals must handle these tasks manually. Recognising the evolving demands and expectations of consumers, the concept of account aggregation in India has emerged as a promising solution to address these challenges effectively. The account aggregation system streamlines the entire process, making it easy, straightforward, and cost-effective for users to manage their financial information and provide it to relevant parties securely.

How would the account aggregator ecosystem transform financial services in India?

The RBI account aggregation in India structure enables clients and their financial service providers to communicate easily. It allows the user a lot of control while doing so, letting them share only what they require for however long they like. Giving customers more power over how their data is used and how to profit from it is a significant step forward. When you've applied for a loan or opened a brokerage account, you've probably had a number of painful encounters sharing your bank statements and other papers with your banks or service providers. It is simpler with the AA structure!

For many years, people have had access to reliable financial solutions through formal financial systems. Numerous initiatives have aided in integrating hundreds of millions of unbanked individuals into the financial system. Still, there is a substantial group of unbanked and underserved customers. It is straightforward to offer financial services goods to customers who are already included, according to the majority of financial services specialists. They have assets, recognised savings or current accounts, a credit history, and more. To assist the traditionally underserved and to do it in a way that is economically viable are two additional challenges that need to be taken into account. The account aggregation in India framework is anticipated to significantly improve efficiency and present a chance to advance the nation's ambition for financial inclusion. It will affect how credit is distributed and make it easier to evaluate and underwrite new-to-credit (NTC) and underbanked borrowers.

Final words

Financial Information Users (FIUs) have high expectations that account aggregation in India (AA), like that of Anumati, will revolutionise the credit risk assessment process, making it more accessible, cost-effective, and efficient. This innovative platform offers several advantages for individuals and small business owners, including a user-friendly dashboard, a unified digital framework, secure data sharing with user consent, easy controls, and robust data security measures.

With the growing adoption of the Account Aggregator ecosystem, numerous new customer use cases are expected to emerge. Micro, Small, and Medium-Sized Enterprises (MSMEs) seeking loans to expand their operations and enhance their business cycles stand to gain significantly. As they expose their digital payment and account data to a competitive array of financial service providers within the network, these MSMEs will enjoy improved opportunities to access instant products and services tailored to their specific needs and requirements.