Account aggregators: The who, what, why, and when framework for financial information sharing
The framework for financial information sharing, encompassing the who, what, why, and when, is a crucial aspect of modern financial systems. In the context of Macro India, information sharing is structured into three fundamental layers, each playing a pivotal role in facilitating seamless transactions and data exchange.
The first layer, known as the Identity layer, is instrumental in providing every resident with a unique identification through frameworks like Aadhaar, eKYC, and e-sign. These mechanisms not only streamline the identification process but also enhance security and efficiency in financial transactions.
Moving on to the Payments layer, this segment focuses on enabling various payment models that allow individuals to transact quickly and affordably. Interestingly, these transactions can now be conducted without the need for a smartphone, thanks to the innovative support layers introduced by the government. Services such as Unified Payments Interface, Aadhar Payments Bridge (APB), and Aadhar Enabled Payment Services (AEPS) are revolutionizing the payment landscape, reaching every individual and corner of the market.
The third layer, the Data Layer, plays a crucial role in ensuring secure sharing of user data. Services like DigiLocker and Account Aggregators are at the forefront of pioneering secure data sharing practices, setting new standards for data protection and privacy.
Delving deeper into the realm of Account Aggregators (AAs), these entities represent a new class of RBI Non-Banking Financial Corporations (NBFC-AA) licensed by the RBI. The technical requirements and policies governing AAs are meticulously framed under ReBIT (Reserve Bank of India Information Technology), ensuring compliance and security in data sharing practices.
AAs operate by allowing users to share their consent for data sharing with financial institutions. These entities receive and store user data securely in the cloud, awaiting requests from financial institutions for data access. Financial institutions leverage AAs to access user data for various purposes, such as loan eligibility checks, without directly engaging with the customers for data retrieval.
The use cases of AAs are diverse and impactful, offering digitally signed, API-driven, end-to-end encrypted, and standards-driven connectivity infrastructure. AAs also provide early warning systems for loan monitoring, enhancing risk management by monitoring key parameters like purpose, ticket size, tenure, and collateral for proposed loans.
Moreover, AAs play a crucial role in eliminating common problems such as data trust issues, data redundancy, data insufficiency, data privacy concerns, and drop-offs in the data sharing process. By addressing these challenges, AAs contribute to a more secure, efficient, and transparent financial ecosystem, benefiting both users and financial institutions alike.
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