Infosys Chairman Nandan Nilekani.
Like the Unified Payments Interface (UPI) scaled rapidly from 1 lakh transactions in 2016 to over 3 billion transactions per month in 2021, Infosys Chairman Nandan Nilekani believes the Account Aggregator (AA) framework, too, has the potential to take off and democratise credit in India.
The Reserve Bank of India’s (RBI) AA framework
went live on September 2 with eight banks joining the network. State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank, and Federal Bank joined the network as Financial Information Providers (FIPs) and Financial Information Users (FIUs).
Speaking at the event, Nilekani said, “Digital footprints when properly used, empowered by consumers using their own data, enables a huge amount of credit to small businesses. It can lead to the democratisation of credit.”
The AA ecosystem when fully implemented can help generate credit information for individuals and small businesses, helping them become eligible for loans, he said.
“Working capital is often not available to small businesses because of information asymmetry. If a business has a digital footprint of its own from payments made to vendors, purchases made by consumers, of invoices, taxes etc, that information can be used by a lender to make a decision to lend to that MSME,” he explained.
He expects the AA framework to pick pace, now that the ecosystem has gone live and more banks have joined as FIPs and FIUs, a scale-up similar to the success witnessed by the UPI.
Nilekani said, “Our experience in technology has been that once all the building blocks are in place and we are able to get everyone connected and on the same platform, suddenly magic happens and things take off. We saw that with UPI. It took several years to bring to the table and was launched by the RBI in May of 2016. In October of 2016, UPI was only doing 100,000 transactions. Today, five years later, it is doing over 3 billion transactions a month.”
The AA framework aims to make sharing of data easy by providing a single platform for the exchange of all information. A new class of licensed NBFCs approved by the RBI in 2016, AA is essentially a technology service provider that shares a customer's information between FIPs and FIUs.
Simply put, it does the job of sharing your data among the respective entities, on your behalf, and with your consent. This is done digitally and ensures the authenticity of documents shared as they are sourced directly from the financial entities.
Nilekani said that the framework can be extended to other use cases in the future, starting with financial services like insurance and pension funds, and can eventually be used to reform access to healthcare.
“Talks are on to get telecom data on this network too. Meaning, tomorrow somebody who has a great track record of making timely prepaid mobile phone bill payments can use that data to get a loan through the account aggregator system. While initially developed for financial services, the architecture can be applied to any sector,” he said.
He added, “In fact, there is a discussion on applying the AA framework to healthcare. So that people are empowered to use their data to get access to better financial services and loans in the healthcare sector. So, this is truly a transformational initiative.”
There are four licensed AAs functioning currently – CAMSFinServ, Cookiejar Technologies, FinSec AA Technologies, and NSEL Asset Data. Players who have received in-principal approval are Perfios Account Aggregation Svcs, PhonePe, and Yodlee Finsoft.
Apart from the banks, other players who are at various stages of FIP/FIU implementations are Bajaj Finserv, DMI Finance, Fi, Kairos Capital, LendingKart, and NeoGrowth Credit.