Recently, India unveiled the Account Aggregator (AA) network, a financial data-sharing system that could revolutionize investing and credit, given the potential pool of customers for lenders and fintech companies.
Account Aggregator
An Account Aggregator (AA) is a type of RBI regulated entity (with an NBFC-AA license) that helps an individual securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution in the AA network. Data cannot be shared without the consent of the individual. It also gives an Individual to choose an Account Aggregator among many.
What's there for an average person?
Our system if filled with hassles today. To ease this a bit, the Account Aggregator network will replace the tedious Paper Process with a easy to use safe digital data access & sharing process.
Data Security
Gradually the AA framework will make all financial data available for sharing, including tax data, pensions data, securities data (mutual funds and brokerage), and insurance data will be available to consumers. But Account Aggregators cannot see the data. All they can do is take the data from one financial Institution to another based on Individual's direction and consent. The data AAs share is encrypted by the sender and can be decrypted only by the recipient.
Way Forward
The two key services that will see a rise is Improved access to loans and access to money management. If a customer wants to get a small business or personal loan today, there are many documents that need to be shared with the lender. Through Account Aggregator, a company can access tamper-proof secure data quickly and cheaply, and fast track the loan evaluation process so that a customer can get a loan. Also, a customer may be able to access a loan without physical collateral, by sharing trusted information on a future invoice or cash flow directly from a government system like GST or GeM.