India Launches Account Aggregator to Extend Financial Services to Millions
India’s top banks five years ago built the interoperable UPI rails and enabled over 150 million people in the South Asian market to pay digitally. Scores of firms — including local firms Paytm, PhonePe, CRED and international giants Google and Facebook — in India today support the UPI infrastructure, which is now reporting 3 billion transactions each month. Banks are now ready for their second act. Eight Indian banks announced that they are rolling out — or about to roll out — a system called Account Aggregator to enable consumers to consolidate all their financial data in one place. (Participant banks are HDFC, Kotak, ICICI, Axis, SBI, IndusInd, IDFC and Federal. Four of them are rolling out the system on Thursday; others say they will roll out the new system soon.) The objective of Account Aggregator (AA) is to aggregate all financial information of an individual, said M Rajeshwar Rao, deputy governor of India’s central bank — Reserve Bank of India — at a virtual event Thursday. The new system makes it possible for banks, tax authorities, insurers and other finance firms to aggregate data of customers — who have provided their consent — to get better understanding about their potential customers, make informed decisions and ensure smoother transactions. Users who provide consent — and it only takes a few taps to do so — will be able to share their financial information from one Account Aggregator participant to another through a centralized API-based repository. Users get to decide for how long they wish their data to be shared with a particular Account Aggregator participant. “Account Aggregator is built in part to also help consumers and businesses access financial services, such as loans. Existing credit bureaus in India have data of only a fraction of the nation’s 1.4 billion population, which makes it very difficult for most in the country to access working capital,” explained Infosys chairman Nandan Nilekani, who’s been an adviser to the initiative. Most of these individuals have made enough digital financial transactions and businesses have enough cash flow to show that would make them eligible for financial services, he said. “Digital footprints, when properly used, empowered by consumers using their own data, enables a huge amount of credit to small businesses. It can lead to the democratisation of credit.” Talks are on to on-board telecom operators as well. The system has already achieved the sophistication that it could be extended to other industries. For retail loan underwriting (‘eligibility check’), rather than submitting previous three years bank statements, I can simply authenticate a data transfer via AA (and revoke the data transfer after the loan is approved or sanctioned). For self-employed or freelance professionals, getting Term Insurance has always been difficult since they cannot prove their income — AA lets you provide an audit trail of past income to underwrite the Term Insurance application.
Tags : News/Views HDFC SBI IDFC Reserve Bank of India India Launches Kotak Extend ICICI Financial Services Account Aggregator Millions UPI Axis IndusInd