Why account aggregators spell great news for rural financial customers

Bertram D’souza, the Chief Product & Innovation Officer at Protean eGov Technologies

There are 13 account aggregators (AAs) that are live and operational at present. Protean eGov Technologies, a late entrant, went live with its services in July 2023.

In an exclusive interview with Moneycontrol, Bertram D’Souza, the chief product and innovation officer at Protean, spoke of the those who would gain the most from account aggregator services, benefits in lower processing time for loans, helping in financial planning, and the limitations faced by AAs, among other things.

Edited excerpts:

Why did Protean apply for an AA licence when there are many others in the field?

Protean was already building national scale e-governance and digital-enabling projects by partnering with the government. For instance, we issue PAN cards and as a CRA (central record-keeping agency), are strengthening the old-age, social security infrastructure with the NPS (National Pension System) and Atal Pension Yojana.

When the construct of the account aggregator DPI (digital public infrastructure) came out, it was best suited for a company like ours with a technology background, the expertise of doing things at a mammoth scale and building something that the citizens trust. The name of our account aggregator product is ‘Protean SurakshAA’, which emphasises security and trust. We went live with our AA services in July 2023 and we are still extremely young as an account aggregator in terms of customers and volumes.

Who are the biggest beneficiaries of the AA framework?

Citizens from rural India are likely to be the biggest beneficiaries. They may have a bank account with a state cooperative bank or a regional rural bank. But these individuals miss out on a loan opportunity from a scheduled commercial bank or from any RBI (Reserve Bank of India)-regulated entity and end up taking a loan from the local moneylender at 5-10 times the prevailing fair-market interest rates.

The account aggregator is designed to include these rural populations into the lending ecosystem. Now, with account aggregator, they can provide their rural bank account details to a scheduled commercial bank with explicit consent. Data gets exchanged between banks to process the loan application. That is how these citizens now stand to get competitive loan offers.

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

How can AAs reduce the processing time of a loan?

Banks ask borrowers to upload bank statement copies while applying online. To eliminate submitting PDF copies online and go completely digital, borrowers can use the AA framework. If the borrower has financial data with multiple banks, the lending bank can get the data through an AA with the borrower's consent, and the loan is processed fast.

It has been observed that with AAs, the drop-off rates of the loan seeker on the journey are lower than when people were uploading a bank statement online because getting a bank statement and coming back to complete the online loan approval and disbursement process was time-consuming and had room for errors to creep in. The old process has a lot of friction.

How can AAs help wealth managers or financial advisors make a financial plan for investors?

We have seen a lot of entities pulling data for a dashboard view of all your investment portfolios and accounts while making or reviewing the financial plan. It can help to analyse an existing investment portfolio and plan for future goals as per the individual's risk appetite.

What are the challenges for AAs?

There are some cases of FIPs (financial information providers) having intermittent issues with account discovery or data fetches and this is something that FIUs (financial information users) are also cognizant of. FIPs are institutions that hold user data. These are the banks, or NBFCs (non-banking financial companies) that share customers’ financial information with FIUs via requests through an AA. FIUs use the data to provide various services to the consumer like loans, insurance or wealth management.

So the success ratio of AAs will not be 100 percent but in the 60 percent to 90 percent zone. In some cases, there are network timeouts while fetching the data and there is a need for a reattempt, like any other technology system.

A current limitation of the AA framework is FIPs don't support an account that is not a sole-owned account. If you try to link your account to an AA and you have a joint account, it will not work even if it's an either/or survivor account, and this is a work in progress. This limitation is not so much the account aggregator ecosystem, it's also the way the banks are designed as per banking regulations for requiring consent from all approved signatories. This means that all businesses where there are multiple proprietors/partners are also excluded.

What is the total number of FIPs and FIUs that are live on the AA framework?

In the industry, the total number as of March 2024 is 148, which means there are 148 entities combining banks, NBFCs, brokers, CRAs, insurance companies, and so on. And the total number of FIUs, or entities who are seeking data, is 406, which has grown significantly in the last six months. It was in the 300-350 range earlier. The reason for this kind of growth in FIUs is that people are seeing account aggregators as a convenient digital way of getting access to a citizen's bank statement and investments.

What are the parameters one should look at before choosing an AA?

The customers should eventually select an account aggregator they trust, which keeps their consents safe and allows them to manage and revoke these consents at any point of time.