In an effort towards augmenting the digital transformation of the country with respect to financial services and creating a highly functional lending system throughout, leading banks and financial institutions in India came up with a dedicated AA or Account Aggregator framework. You can come across such advanced solutions from leading account aggregator companies as well. It is typically a revolutionary data-sharing system that serves to be a game-changing solution for both borrowers and lenders by putting more power in the hands of end consumers.
An Overview of the Account Aggregator System
Account aggregators in the country are regarded as licensed entities by the RBI or Reserve Bank of India. The unique system aims at consolidating the financial information of the users in real-time with their permission while providing valuable information to banks and financial institutions. It is developed on the theme of UPI or Unified Payments Interface. It will, in turn, make the process of borrowing simpler while revolutionizing banking in several ways.
Some of the major banks include Axis Bank, ICICI Bank, State of Bank of India, Federal Bank, and others have collaborated with the Account Aggregator network -all of them providing their customers the option of sharing financial data with other financial firms with the help of the API-centric repository.
For instance, when you apply for the personal loan, you can consider leveraging account aggregator solutions for collecting details about the financial institution accounts or additional assets & belongings while submitting the information to the lender. The account aggregator system is useful in collecting the data directly out of financial institution and providing the same to the lending bank. This can help in establishing the overall eligibility for the loan offline or online. It also assists financial institutions effectively understand existing or potential customers while personalizing their services according to their specific needs.
Important Components of the Account Aggregator System
The Account Aggregator or AA system features three core components:
- FIP or Financial Information Provider
- FIU or Financial Information User
- Account Aggregators
The FIU serves to be the lending bank that requires access to data pertaining to borrowers or customers towards understanding their eligibility before the amount is lent out to them. Similarly, FIP has access to crucial data about the customers -providing the same to FIU. The FIP can be the NBFC (Non-banking Financial Company), a bank, pension fund repository, mutual fund repository, insurance repository, or the wealth supervisor.
Leading AAs in India like Account Aggregator Anumati serve as the ultimate intermediary for collecting data from the FIPs holding financial data of customers and sharing the same with the FIUs -including lending agencies or banks delivering financial services.
The Detailed Process Followed by Account Aggregators
- An individual will go ahead with opening the account with reliable account aggregator companies while creating a dedicated funnel for financial information. It is achieved by linking the respective bank accounts featuring all important data.
- As the customer will apply for the loan or avail any other financial product from the institution, the lender decides to access the financial data with the help of NBFC Account Aggregators.
- Once the consent has been received, the account aggregator will reach out to the respective financial data providers for accessing data related to the consumers.
- As the account aggregator will receive relevant data, lenders are able to assess the same while evaluating the eligibility of the borrowers along with the potential risks in providing the loan.
What are the Benefits of the Account Aggregator System?
The industry experts believe that the AA or Account Aggregator system can help in taking off and democratizing credit in the country -just like UPI. During the launch of the AA framework by the RBI, it was claimed by experts that when digital footprints are used properly, supported by consumers with the help of their data, it will ensure a great volume of credit to small-scale businesses. It will ultimately lead to the democratization of ample credit.
Some additional benefits of the AA framework are:
#Streamlining Data
Financial data tends to be scattered through multiple financial institutions. Therefore, it becomes challenging for lenders or customers to retrieve the same. With the help of the account aggregator systems, huge volumes of data can be easily consolidated. Data is effectively brought to a single place with the consent of the customers while being provided to the respective lender or bank.
#Single Window Mechanism with the Consent of the Users
The account aggregator system helps in providing customers ample access to a wide range of financial services on a single portal -out of multiple institutions. As it is purely out of the consent of consumers, they are given the opportunity to choose specific financial information that they wish to share with the lender or the bank. The customer will have full control over the existing data. Moreover, they can also consider setting a proper time frame for which the process of data sharing will be open for the institutions to obtain out of the system.
#Improved Efficiency of Credit Services
The consented form of financial data that is accessed by the account aggregator system will enable lenders to ensure an in-depth assessment of the financial history of the borrowers. Moreover, it also helps in processing more loan applications quickly by ensuring due diligence.
#No Requirement of KYC or Paperwork
Once the financial institution of the customer has been registered, there is no requirement of providing KYC details or paper-based documents while applying for loans on a constant basis. All that the customers are expected to do is to offer consent to the AA. The AA will eventually extract all important details and provide the same to the bank through which customers can apply for the desired loan.
Conclusion
The account aggregator system serves to be a game-changer in the lending domain. It is a major step towards bringing the concept of open banking in the country while empowering millions of customers to effectively and digitally access as well as share financial data across the institutions in the safest manner.
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