The RBI’s account aggregator framework has been a veritable revolution, considering its applicability and several other factors. Data is now the lifeblood for everything in the modern world.
This is where the discussion around account aggregator frameworks and their types begins.
The RBI came up with the account aggregator framework in 2021 for ensuring the easier accessibility of financial information through various data-based intermediaries or account aggregators in India.
These are the intermediaries, as guided by the account aggregator framework RBI, who have responsibility for the collection of financial details of users from multiple entities like FIPs (financial information providers) who hold data of consumers, and share it with those entities seeking data on the basis of the consent of the user.
The framework enables end-users to obtain major control over financial information, being a major move towards helping users benefit from their data usage with multiple advantages. It will ensure a more efficient method of financial information sharing, helping lower costs of transactions and financial fraud related risks.
This will help users also access diverse banking solutions at lower costs and quickly at that. While there can be account aggregator framework types available, the process involves compiling financial data from various sources.
This includes income, invoices, expenditure, equity related investments, deposits, receipts, tax returns, and a lot more. The AA mechanism has ample scope towards data democratization and filling up the gaps between users and FIPs.
According to several reports, the AA framework is aiming at developing on trust as delivered by credit bureaus, towards offering an extensive global data stack for all lenders. Better financial education and the AA mechanism will eventually help those consumers in understanding the impact of their activities.
The account aggregators also help in ensuring improved credit for underserved/un-served individuals.
Most financial institutions adhere to a pre-defined system for ensuring credit availability for borrowers. This encompasses identity verification, regulation, assessment of credit risks, and more. They take into account credit history of borrowers and it is often difficult for borrowers without financial history to get credit.
The framework will help in building repayment abilities and trustworthiness of these borrowers via data sources which are well-defined for creating the trust of the lender.
The procedure by which NBFCs and banks ensure available credit for borrowers is based on multiple aspects, right from verifying identity to regulation to also assessing credit risks. With the high population of underserved customers still in the market, and the increasing spread of digital technologies and payment systems across the country, the importance of AA frameworks and solutions will heighten even more.
The AA framework will ultimately ease the entire procedure of assessing credit risks, while making it accessible and reasonably priced as well. With more users tapping into the ecosystem, there will be newer use cases coming up for consumers. MSMEs and individuals will equally benefit from such frameworks.
FIUs or financial information users also expect that AA will be ensuring these objectives, while making the procedure of assessment more affordable and also timely. There could be benefits via the digital framework, a consumer-friendly dashboard, data sharing with the approval of users, and easier controls.
With users coming on board this AA system, there will be services that will come up in the future. MSMEs seeking business loans expansions or working capital will naturally profit from their account or payment based relationships, while getting exposure to competing financial service solutions who are striving to attract their business.
