Last week, the Indian government unveiled a new system for sharing financial data called the “Account Aggregators” (AA) network. This new system could revolutionize the system for sharing financial data in the country for investment and credit. It was introduced with the goal of giving consumers across the country greater access and control over their financial records, while simultaneously expanding the customer base for lenders and other fintech companies. Without the presence of account aggregators, information is not as accessible and often remains in silos. This approach would be a step in the direction of the introduction of open banking system in India with greater digital integration. So far, however, the account aggregation system has been launched with eight of the country’s largest banks and can facilitate lending as well as overall wealth management.
Explanation of the account aggregation system: how it works
An account aggregator is basically a system or entity that falls under the jurisdiction of the Reserve Bank of India (RBI). This entity also holds an NBFC-AA license. The essence of this system is to allow customers to access their financial information via digital media in a secure manner. This information can then be shared from one financial institution to another within the same AA network. In addition, data cannot be shared without the person whose information is located, giving their consent. In fact, the individual’s permission must be taken for each use of financial information throughout the process. It is a step by step process.
How Can Account Aggregators Help You Manage Your Financial Affairs?
The financial system as it stands is a cumbersome process at best. Of course, there have been improvements in systems, payment gateways and higher levels of mobile phone penetration that have enabled increased digital mobility. However, there are still aspects of daily finances that are physically exhausting. Getting notarized documents, printing bank statements, standing in a long queue for what should be a 10 minute job are some of these frivolous exercises. The AA network basically eliminates all this excess and streamlines the process with a simple, mobile data access system with an equally secure sharing process.
For this to happen, however, the bank to which the customer belongs must join the AA network. To date, a total of eight banks have joined the initiative. Of these eight banks, four of them are already actively sharing data through the consent-based system. These banks are Axis Bank, ICICI Bank, HDFC Bank and IndusInd Bank. The other four banks, State Bank of India, Kotak Mahindra Bank, IDFC First Bank and Federal Bank will soon join the ranks.
Is the account aggregation software secure?
Through the use of account aggregators, customers can share transactional data as well as bank statements from their savings or checking accounts. Over time, as the network and facilities improve, a more diverse range of data can be shared, such as tax data, pension data, securities data (mutual funds and brokerage) and even insurance data, to name a few. It is also planned to expand in the health sector and in the field of telecommunications data. With all of this information ready to be shared, it’s natural to have doubts.
However, it should be noted that account aggregators cannot see the data, they are just the delivery mechanism, and they cannot “aggregate” the data as the name suggests. The whole process has end-to-end encryption for privacy and security.
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