Account Aggregators (AA) – Democratising the data ownership
AA framework can transform MSME lending similarly to what UPI did for digital payment
Account Aggregator Framework, an initiative led by RBI, is the latest step taken by the Government of India to make India future-ready to manage the data and its privacy.
Account Aggregator Framework hands over user data to the user, making the banks gather and maintain data into custodian. With the emerging digital economy, more and more bank accounts, loans, insurance, E-commerce transaction are taking place, leading to the creation of more and more user data. This control of this user data is currently is not with the user. This is the problem that the AA framework is trying to address.
In theory, the AA is built like the UPI apps. The client can connect all of his bank accounts, GST account etc., in the app. Every time a third party, say an insurance company or a loan provider, need access to the customer information like his/her transaction details, GSTIN info, account balance etc., they will send a request for the information accessible to the client AA app, which is then approved by the client who maintains control over the factors such as type of information provided and the duration of the access. Through this, the FIP and FIU could gain access to complete financial information of the client, which was not accessible to them before to customize products or to access the creditworthiness. Still, at the same time, it puts the customer in the driving seat on controlling and directing the data use. AA can help unlock $500Bn MSME lending and can be another game-changing initiative, AA Framework Can Do What UPI Did For Digital Payments
Both big companies and start-ups are emerging in this space
Mukesh Ambani’s Reliance Jio, Aditya Birla fintech company, has applied for an AA license
Startups such as Finvu, Onemany are also building their business model around AA.
AA also has the potential to grow beyond from being the aggregator of major data into a comprehensive aggregator of other non-traditional, alternative data such as utility payment, revenue tax on agricultural land, water bills etc., to cater to the next billion underserved segments in India, making not only credit accessible to them but also unbundling numerous sachet-size financial products such as micro-insurance and investment.
To gain more insights on this, kindly refer to the below,
“This can be as big as UPI” - Understanding the Big New thing in India tech
DEPA and Account Aggregators: The Future of Personal Data Sharing
Here’s how account aggregators share financial data of customers with bank
This week’s News
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The Reserve Bank of India (RBI) on Monday proposed to lift the interest rate cap on microfinance institutions (MFIs) and said all microloans should be regulated by a common set of guidelines irrespective of who gives them.
Proposing a debt-income ratio cap, the RBI said the loans should be given in such a way that the payment of interest and repayment of principal for all outstanding loans of a household at any point of time should not cross 50 per cent of the household income.
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The gross loan portfolio of India’s microfinance sector grew 17% year-on-year (y-o-y) to Rs2.11 trillion, industry association Sa-Dhan said in a statement on Friday.
The 17% increase in the portfolio comes despite the sector having witnessed unprecedented times in the wake of the covid-19 pandemic, said P Satish, executive director, Sa-Dhan, an industry body comprising 225 microfinance institutions across India.
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