After the Indian government’s long-awaited account aggregator framework went live with four Indian banks, Infosys chairman Nandan Nilekani stated that “the technology has the potential to be used across numerous use cases, similar to how the unified payments interface (UPI) has been used thus far”.
Nilekani, who has worked closely with the India stack suite of products, stated that the AA will allow users more control over their data because of the tremendous amount of data footprint that people are creating online.
In the Account Aggregator ecosystem, Financial Information Users (FIU) can construct a variety of use cases. The traditional use cases described below are already in use, however, they are inefficient. When onboarded to the Account Aggregator ecosystem, the following use cases can have a significant impact.
In today’s world, a borrower can give a lender hard copies or PDF documents containing their banking and other information. This method is not ideal because the borrower must spend time collecting the data to be supplied, and the lender must process the data using the screen scraping method. These documents are also not tamper-proof.
- Banks and NBFCs should take advantage of AA’s massive opportunity to boost safe lending velocity.
- AA removes roadblocks to data access, allowing them to handle more loan applications in less time.
- Lenders who use Account Aggregators can obtain real-time data from borrowers, which is digitally signed by the Financial Information Provider (FIP), such as the borrower’s bank.
- AAs can assist lenders in reducing the risk of their loan portfolios. NPAs must be reduced.
- Lenders can provide more tailored and customized loan products to their customers.
- And then there’s AA’s most critical feature: loan monitoring. Lenders can now track loan accounts after they’ve been disbursed, allowing for early intervention and smaller loan loss provisions.
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In India, wealth managers rely heavily on their clients to produce data on a regular basis. The customer has the option of sharing the credentials with the wealth manager, which eliminates the need for the client to provide data, although this is not the best approach to do so.
A data principle (a client of a wealth manager) can provide an account aggregator recurring Consent to share data from selected FIPs with the wealth manager. This approach provides a number of benefits-
- The data principal is not required to disclose the FIP’s credentials with the data principal (login, password)
- The wealth manager is not reliant on their client’s willingness to disclose information.
- The wealth manager receives data in digital format, which can be fed directly into the platform of the wealth manager, which can generate actionable reports.
India’s wealth management market is small, but it should be much larger. Wealth managers may commit more time to acquire new clients with the support of AAs, while technology will aid them in their day-to-day operations.
Personal Finance Management
In India, the use of personal finance management (PFM) apps is low. Most of us assume we “know our finances” and don’t require assistance. In India, there are a few PFM apps that can view your bank account statements via one of the following methods:
- A user uploads PDF files.
- The app receives the user’s login credentials.
Both of the ways mentioned are ineffective, especially the second if you value your privacy. In their lifetime, each individual makes approximately 200 financial decisions, including selecting a bank to create a savings account, obtaining a home loan, obtaining a personal loan, purchasing and selling mutual funds, ,purchasing and selling insurance policies, etc.
Individuals may use good PFM apps to make better financial decisions based on their personal data. It is critical for PFM apps to provide actionable reports in addition to graphically presenting data.
In India, Robo-advisory apps are still in their infancy. Robo advisory solutions are preferred by millennials. Robo advising is based on a lot of technology, and if their algorithms are good and updated on a regular basis, one may expect extremely good actionable reports.
Many people in India are now using Robo Advisory applications to invest in mutual funds. If these apps have real-time access to your financial data, the Robo adviser will be able to make far better recommendations. The following are some of the features of Robo advisory apps-
- Recommendations for portfolio rebalancing and assessment.
- Make the switch to direct investment analytics.
The collecting of data in the current arrangement is a very inefficient operation; there may be too many hops to acquire, extract, and process the data. Robo advisors in the AA future will receive digital data straight from data fiduciaries (FIPs such as banks, mutual fund depositories, insurance policies).
Aggregation of Financial Data
The Reserve Bank of India has licensed an Account Aggregator to act as an intermediary or exchange platform for banks and institutions that share and use data from the system. The platform’s job is to bring all of a customer’s financial data together in one location and operate as an information custodian.
Any bank, insurance firm, or mutual fund that shares data with AA, for example, will be able to access the data exclusively through the system. As a result, your bank or financial institution must be a member of one of the active AAs in the market.
KYC & ID Verification
The procedure of sharing data becomes simple once your bank or institution provider is registered, as the institution is connected to the AA system via APIs. You don’t need to submit any paperwork for KYC if you need a new loan, want to acquire an insurance policy, or want to invest in a mutual fund, for example.
All you have to do is give AA your permission to share your data with banks and organizations. The AA will digitally extract the information from your bank and send it to the bank or organization where you are asking for a new loan or investment.
By unifying all your data in one place and offering a single digital framework to exchange it in real-time, Account Aggregators give you the power to quickly transfer data between multiple financial service providers. Pirimid is an empaneled technology service provider with Sahamati. 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.