Account aggregators go live: Here’s how customers can share financial data with banks

The Reserve Bank of India’s (RBI) Account Aggregator (AA) Framework went live on September 2 with eight major banks joining the network. It includes State Bank of India (SBI), ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank, and Federal Bank. These banks have joined the network as Financial Information Providers (FIPs) and Financial Information Users (FIUs). Together, these banks cover nearly 40 percent of India's banking customers.

AA reduces the need for individuals to wait in long bank branch queues, use complicated internet banking portals, share their passwords, or seek out physical notarisation to access and share their financial documents securely. Just as Unified Payments Interface (UPI), NEFT, or IMPS are key financial utilities for secure flow of money, account aggregator is a powerful financial utility for the flow of data controlled by the individual.

“Over the last few years, India has introduced numerous innovations in cashless, presence less and paperless transactions. The AA are an exciting addition to India’s digital infrastructure as it will allow banks to access consented data flows and verified data,” says Anjani Rathor, Chief Digital Officer, HDFC Bank. He adds, this will help banks reduce transaction costs, which will enable us to offer lower ticket size loans and more tailored products and services to our customers. It will also help us reduce frauds and comply with upcoming privacy laws.

What is an account aggregator entity?

In September 2016, the RBI had proposed setting up of an account aggregator that would act as a common platform that captures all your financial details in one place. The account aggregator will help individuals share their financial data with third parties in a safe and secure manner, and give them greater control over how their data is being used.

The four major financial regulators — RBI, Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA) and Securities and Exchange Board of India (SEBI) – came together to allow regulated entities under their control to share data with account aggregators after taking user consent.

BG Mahesh, Co-Founder of DigiSahamati Foundation, a Collective of the Account Aggregator Ecosystem says, “The Account Aggregator framework is expected to revolutionise lending, wealth management and financial planning in the next few years, as individuals start to control the flow of their data held currently in silos across various financial institutions.”

Account aggregators with operating licenses from the Reserve Bank of India (RBI) include CAMS FinServ, Cookiejar Technologies (Product named Finvu), FinSec AA Solutions Private (OneMoney) and National E-Governance Services Asset Data. Three more have received in-principle approval (PhonePe, Perfios, Yodlee), and many more are in different stages of application.

Consumers using the AA financial utility will benefit not only from ease of access to data but also from greater choice of products, better pricing, and increased financial inclusion. With the Personal Data Protection Bill likely to become law soon, the AA framework will become essential for regulatory compliance and access to consented data flows.

How will the account aggregator framework help my financial advisor take a holistic view of my portfolio and give recommendations?

Earlier, when you approached a financial advisor for the first time, on-boarding would take a lot of time, as you would have to keep your mutual fund account statements, insurance policy documents, bank account details etc. handy. But now, your financial planner can access all your financial information without you having to run around collecting all individual documents. By engaging an account aggregator, the full view of your finances can be shared instantly with a wealth manager. Users will get real-time prices of investments. Gajendra Kothari, Founder and Managing Director of Etica Wealth Management says, “An investor can get a bird’s eye view of her entire wealth. The entire portfolio can be analysed quickly. This will be a real game-changer for the advisory industry.”

Soumitra Sen, Head of Consumer Banking at IndusInd Bank says, “As an ‘FIP’, banks will facilitate sharing of financial information with Financial Information Users (FIUs) on the Account Aggregator Ecosystem in a secure and seamless manner. Customers will be required to give consent for sharing this information with the FIU.”

I plan to apply for a home loan. How will an account aggregator be of help?

The home loan application process is cumbersome for an individual. As a borrower, you are required to submit various documents, including include bank statements, salary slips, income-tax returns, Aadhaar and a permanent account number (PAN). You have to arrange for these documents from various sources and submit them to the lending institution. The lender has to verify all these documents. There is an additional cost for the lender and the processing time is increased in the verification process.

Now, by using account aggregators, all these details can be shared with lending financial institutions with a click using a mobile application and so the loan processing time is drastically reduced. “This will happen once other financial institutions go live on the AA framework,” says Sen.

“The data shared with consent is authentic as it comes directly from the bank. The ability to lend in such instances is significantly better and the processing cost is economical for the lending bank. This will help us to reach a much broader set of borrowers,” says Sameer Shetty, EVP and Head-Digital Banking, Axis Bank.

Account aggregators will reduce the need for paper trails, processing time and simplify the verification of documents for financial information users. Harshvardhan Roongta, Principal Financial Planner at Roongta Securities says, “Money that shall be saved by taking account aggregators on-board by the banks before lending may translate into lower interest rates for borrowers in the future.”

Is my data safe with the account aggregator?

The account aggregator does not store or save any data transmitted between financial information providers and users. The data shared through the account aggregator is encrypted and can only be accessed by entities requesting the data. Vishal Dhawan, founder and CEO of Plan Ahead Wealth Advisors says, “This prevents stealing of confidential data and secures users’ data.”

N.R. Sudarshan, Vice President, CAMS FinServ says, “Users will be able to revoke consent to share data and will also be able to share individual items of data without sharing the full history.” These tasks are almost impossible to accomplish when bank statements, mutual fund statements etc. are shared in the paper form or downloaded and sent to wealth managers which can be misplaced or fall into wrong hands.

How do I rectify discrepancies in the data shared with the users of financial information?

You need to get it rectified from financial information providers. Account aggregators don’t have any role, as they don’t have access to data that is transmitted. You may have to take up errors in data or other issues with your bank/mutual fund house/ insurance company, and get them rectified, which will take some time. Once done, you may have to give your consent again to the account aggregator.