Account Aggregators link up 80,000 bank accounts, but SBI is yet to go live

The account aggregator facilitates sharing of financial information in a real-time and data-blind manner between regulated entities.

The Account Aggregator (AA) framework, which is expected to transform the way financial data is shared, has seen more than eight-fold spurt in the number of bank accounts linked across last 20 weeks.

The ecosystem is still waiting for India’s largest lender, the State Bank of India (SBI), to go live.

According to data by Sahamati, the not-for-profit self-organised collective for the AA ecosystem, the number of linked bank accounts has gone up from 10,000 in the second week of September 2021 to 80,000 now. The ecosystem has fulfilled 67,000 consent requests till date.

The account aggregator, simply put, facilitates sharing of financial information in a real-time basis between regulated entities. AAs are licensed by the Reserve Bank of India to enable the flow of data between Financial Information Providers (FIPs) and Financial Information Users (FIUs).

FIPs are institutions that hold customer data and FIUs are entities that consume data to offer better service, underwrite loans, etc. An AA is data blind and only receives encrypted data which is decrypted only by the FIP.

“The past few months have been more of testing the system and making sure that you know that things stand up. The click-through rates, success rates are good. The next step for us now is to grow the number of FIPs and the types of accounts types,” Srikanth Rajagopalan, Chief Executive Officer of Perfios Account Aggregation Services, said.

As of now, only individual current and savings accounts and deposits can be linked to AAs. The huge pool of small and medium enterprise (SME) accounts and asset classes like securities, insurance and mutual funds need to be opened up to AAs. This is likely to happen over the next few months.

“Our focus is to now get more banks to go live. We also have to work on cross-sectoral implementation, product and user journey. Insurance companies have started working on implementation. For mutual fund players, we are in talks with them but implementation is yet to begin,” BG Mahesh, Co-founder and CEO of Sahamati, said.

SBI, which has the largest share of accounts in India, however, is working on a pricing model because the bank wants to be compensated as it will be the largest information provider.

“SBI is still trying to figure out a financial model. They want a per data pool pricing to be agreed upon, or a share in the profit earned by the FIUs through the data received. Some of the FIUs are not really open to this idea, but a few are,” said a senior executive with an NBFC on condition of anonymity.

Once SBI goes on board, other large public banks too will follow suit. Sahamati’s website shows that SBI and Kotak Mahindra Bank are in the testing mode. SBI’s participation is also key because it will open the window for a huge pool of the bank’s customers to use the AA framework and allow easy access to financial services.

The bank is also working on the infrastructure needed to manage and share the huge pool of data it possesses. Since the data has to be accessed from the core banking system, it will require additional levels of security and audits.

“The exact viable business model is yet to be identified. SBI acknowledges that they have a huge role to play as the largest bank in the country. Ultimately it will be a positive for them as well because the largest providers also end up being the largest users of data. It’s far more efficient and saves a lot of costs,” said Perfios’ Rajagopalan.

However, with the framework still at nascent stages, the overall value proposition for large banks is still getting proven. Once there is enough data on usage of the framework, it will become clearer how big banks are set to also benefit as users of data, Rajagopalan said.

The RBI, too, is keeping a close watch on this and may intervene only if the pace does not pick up after some more time has passed.

“From our conversations with the RBI, we understand that if most banks don’t go live after a certain point, then the regulator may consider making it mandatory for all banks to share data through AAs,” said the executive quoted above.

Six banks are live on the ecosystem, including Axis Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank and IndusInd bank. Eleven more NBFCs and investment advisors too are live as FIPs and FIUs.