Consider the situation when you require a small loan that banks and other financial institutions are unable to provide due to a lack of credit history. Imagine a financial app that checks your timely bill payments and provides you with a loan based on that.
The government has unveiled the ‘Account Aggregators’ (AA) network, a new financial data sharing system that has the potential to transform the country’s financial data sharing system in terms of investment and credit.
The network, which is made up of three tiers – FIP, FIU, and consumer – is a repository of user data. Customers’ data will be held by a Financial Information Provider (FIP), which can be a bank, a non-banking financial institution, a mutual fund, an insurance repository, or a pension fund repository.
The data from a FIP is then consumed by a Financial Information User (FIU), who provides various services to the consumer. The FIU is the lending bank that requests access to the customer’s or borrower’s data in order to determine whether or not the borrower is eligible for a loan. Banks will serve as both a FIP and a FIU in this scenario.
Customers will not be able to conduct transactions using the system, but necessary methods for client identification will be in place. Eight of India’s main banks have joined the account aggregator network so far: State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank, and Federal Bank.
How Does the AA System work?
Account aggregators can let users make a variety of financial operations paperless and cut turnaround time. A simple authorization to the account aggregator to exchange information from your bank accounts with an asset management organization, for example, can assist in the completion of a transaction like a mutual fund investment.
The AA network allows senders to transfer encrypted transaction data or bank statements from savings/deposit/current accounts, which can only be decoded by the receiver. Consumers will eventually have access to all financial data, including tax data, pension data, securities data (mutual funds and brokerage), and insurance data, thanks to the AA framework.
It will also grow outside the banking sector, allowing individuals to access healthcare and telecom data via AA over a period of time in future.
Features of Account Aggregation Network
The Account Aggregator achieves a compromise between the requirement for more financial data sharing in order to improve financial services and customer data privacy protection.
100% Data security
The sender encrypts the data that AAs communicate, and only the recipient may decipher it. Customers’ data may not be stored, processed, or sold by AAs; instead, it may be transferred from one financial institution to another at the direction and consent of a person.
Recurring Access to Data
At any point, a consumer can decline permission to disclose their data. If a consumer agrees to share data in a recurrent manner over a period of time (for example, during the term of a loan), the consumer can revoke that agreement at any moment.
The consumer will be shown the exact time period for which the recipient institution will have access when they consent to data sharing. The RBI has established strict data security rules on the AAs, as well as a customer redress system.
Currently fintech firms are using different vendors and API providers to access bank statements of their customers. Generally, the current system costs around Rs 30-200 for accessing one bank statement.
Since AA is a fully digital standardized solution, complexities are very low. Hence, the cost to access one bank statement is 50-70% cheaper than what companies are paying right now.
In the current scenario, firms use multiple methods to source bank statements of their customers and all the approaches are not direct and completely digital. Hence, only a fraction of bank statement requests are made available on a real-time basis.
Account aggregation works through a digital API connection between FIP and FIU, facilitated by Account aggregators. Entire work happens digitally through standard APIs defined under AA framework. Hence, the entire process is real-time and does not take more than 2 minutes.
Account aggregator architecture is taken from UPI which works with OTP based authentication and automated bank account fetching and linking. Success of UPI is a testament that AA is going to be consumer friendly, hence would deliver a very high conversion rate.
Choosing the Right Account Aggregator
Choosing the right aggregator becomes easy when you look for the following aspects-
Generally, to access bank statement, FIUs need to pay for – a) Bank statement access fees, b) Consent management/ control dashboard fees. Most businesses access a large proportion of bank statements on their consumers; hence the requirements are going to be high in volume. Therefore, make sure the price charged by your AA are competitive.
Choosing a Sahamati empanlled Technology Service Provider (TSP) like Pirimid, who has access to most of the live account aggregators can help you in getting competitive price. At a low price point and best-in-class service quality, your AA experience is all set to become a seamless integration experience.
Choose an aggregator who can make your integration timeliness a seamless one. Pirimid has experience in onboarding large number of financial institutions under AA. By leveraging our learning curve, we can offer an exceptionally fast integration to firms willing to join the AA network.
Support for other AA’s
Make sure, your AA is offering interoperable solutions and your customers earlier registered with another AAs are not being asked to re-register on your platform. It will impair the customer experience and reduce your conversion rates.
Consider this scenario: you’re collaborating with ‘Account Aggregator X’ for your loan business, and you’ve got a customer who has previously used AA to share bank statement but with different AA, say ‘Account Aggregator Y’. Hence, make sure you are not asking the customer to go through all the stages again, so all you need them to do is login and grant approval.
Value Added Services
Getting the raw bank statement in xml format may not solve your business case. You need the entire tech stack to read those bank statements and generate valuable insights from the same. Hence, make sure you are getting all the solutions under one roof.
Pirimid, is a pioneer in bank statement analysis. We have the expertise to work for global clients in bank statement analysis. We use advances Natural Language Processing and Machine Learning models to generate useful insights to be used for various use cases such as lending, wealth management, etc.
Having a dedicated support team to answer all your questions and queries is a must. Pirimid’s rich experience and professionalism allow them to cater to your needs and act as strong foundational support to any difficulty or assistance you might need.
By unifying all the data in one place and offering a single digital framework to exchange it in real-time, Account Aggregators give you the power to access financial data quickly on your consumer. Pirimid is a Sahamati empanelled Technology Service Provider(TSP). With an agile working ecosystem and rich experience in delivering high-quality tech frameworks at low costs, we offer world-class service with lifetime support.
Reach out to us at email@example.com to know how AA can benefit your business.