In the recent past, managing financial data was a cumbersome process. Individuals had to physically visit their banks, stand in long queues, and go through a tedious process of getting their financial statements attested. This often meant taking time off work, causing not just a loss of income but also adding stress. The process didn’t end there. Once they got their statements, they had to manually share these with different financial institutions, either by post/courier or by visiting their offices.
The Account Aggregation (AA) system, regulated by the Reserve Bank of India (RBI), is a game-changer in the above scenario.
How does the Account Aggregation system work?
An Account Aggregator is a digital platform that allows individuals to access and share their financial data securely. This data can be shared with any regulated financial institution in the AA network, and importantly, it cannot be shared without the individual’s consent.
So basically, there are four parties involved.
- Customers
- Financial information providers (e.g. Banks, MF houses, insurers, NBFCs etc)
- Financial information users (e.g. lenders, brokers, banks, NBFCs wealth management companies, robo advisors etc)
- Account aggregators
Account aggregators are at the centre of this system. They obtain a customer’s financial information like bank statements with specific customer consent and share it with FIUs.
Benefit of Account Aggregation System
The AA replaces the traditional blanket permission (where an individual had to share all the personal data and didn’t have specific information-sharing options) with a granular, step-by-step permissions and control system for each use of the user data. It’s a simple, mobile-based process that ensures safe digital data access and sharing.
Imagine what relief it could bring to those seeking loans or trying to make new investments. KYC documentation will be a breeze! Also, banking transaction data, like bank statements from a current or savings account, will be shared across the banks/ financial institutions that have gone live on the network with just a tap on your mobile device!
More than 20 of India’s largest banks are part of this system. An indicative list is provided below:
- SBI
- Bank of Maharashtra
- Bank of India
- Bank of Baroda
- HDFC bank
- Axis bank
- ICICI bank
- IDFC first bank
- Canara bank
- AU Small Finance Bank
Source: PIB
How do I sign up for an Account Aggregator?
To sign up, individuals can:
- Choose an AA,
- download their app or visit their website,
- sign up,
- enter the OTP received for verification,
- link their bank accounts.
- The AA provides a handle, like a username, that can be used during the consent process.
While some AAs might charge a small fee, many are free because they charge the financial institutions. This competitive environment makes it difficult for aggregators to make money. The lowest rates were around 75 paise per data pull!
Overall, the AA system is a significant step towards open banking in India. It empowers millions of customers to digitally access and share their financial data for their investing and credit needs.
It’s a win-win situation for all – the individuals get a hassle-free experience, and the financial institutions get easy access to vetted data. This is indeed the future of financial data management in India.
Note: The above content is for informational & educational purposes only. Not advice. Please consult your financial advisor before investing.
