Account Aggregation in India: Everything you need to know

It is common for individuals in India to have multiple financial accounts, such as bank accounts, credit card accounts, insurance, EPF, NPS, etc. Also for MSME bank, GST, etc with different financial institutions.

This can make tracking spending and managing finances challenging, as the financial data is scattered across multiple accounts and platforms and the consented data is not available in digital format in real-time.

Account aggregation?can be a useful tool for individuals in India to bring together their scattered financial data and view it in a single place, which can make it easier to track spending, create a budget, and make informed financial decisions.

In this article, we will know all cover all the below questions about Account Aggregation:

1. What is Account Aggregation (AA)?
2. What is Account Aggregation Framework?
3. How is Account Aggregation useful for you?
4. Why does India need an Account Aggregation Framework?
5. RBI Certified Account Aggregators in India
6. What are the demerits of the Account Aggregation framework?
7. How to evaluate an Account Aggregator & TSP for AA?
8. Account Aggregation - A threat or a boon?

What is Account Aggregation (AA)?

Account aggregation is an RBI regulated consent-based financial data aggregation platform, that allows an individual to view all their financial accounts in one place.

This can include bank accounts, investment accounts, insurance, EPF, and GSTN. It’s for any citizen/citizen charter. At this stage, it’s for Individual/sole prop. In a couple of years, it will include all the citizens including SMEs.

It is a process of collecting and organizing data from multiple financial accounts into a single, consent-driven, real-time end-to-end encrypted view.

This can be done manually by an individual, or it can be done automatically using account aggregation software or services.

What is Account Aggregation Framework?

India launched account aggregator framework in September 2021 to boost financial inclusion.

An account aggregation framework is a set of rules and guidelines that govern the process of account aggregation.

This can include details about how financial accounts are linked and accessed, how data is collected and shared, and what safeguards are in place to protect the security and privacy of individuals' financial information.

An account aggregation framework may be put in place by a financial regulator, such as a central bank or other government agency, in order to ensure that account aggregation services are operated in a safe and transparent manner.

The goal of an account aggregation framework is to provide consumers with a secure consent driven and convenient way to access and manage their financial accounts, while also protecting their financial data and privacy.?

How is Account Aggregation useful for you?

Account aggregation refers to the process of collecting and combining information from multiple financial accounts into a single view or platform with customers consent.

This can include accounts like bank accounts, credit card accounts, investment accounts, and other financial accounts.

Account aggregation can be useful because it allows you to see all your financial accounts in one place, which can make it easier to track your spending, manage your budget, and make informed financial decisions.

For Lenders, it can be a great tool to view portfolios of customers with their consent and take informed lending decisions and also monitor the lenders post that.

Some FIUs also offer features like the automatic categorization of transactions and alerts when you approach your budget limits.

Account aggregation can be particularly useful for individuals and small businesses that have multiple financial accounts and want an easy way to manage them all in one place.

Why does India need an Account Aggregation Framework?

There are several reasons why consent based account aggregation may be useful in India?

Convenience: Account aggregation can make it more convenient for individuals and businesses to access and manage their financial accounts, as they can view all of their accounts in one place rather than having to log in to multiple accounts separately.

Financial management: By providing a single view of all of your financial accounts, account aggregation can make it easier to track your spending, create a budget, and make informed financial decisions.

Data security: Account aggregation can help to improve data security by allowing individuals and businesses to access and manage their financial accounts through a single, secure platform rather than having to log in to multiple accounts separately.

Financial inclusion: Account aggregation can help to improve financial inclusion by making it easier for individuals and small businesses to access and manage their financial accounts.

Overall, account aggregation has the potential to bring a range of benefits to consumers and businesses and has generally been well-received by users.

RBI Certified Account Aggregators in India

In India, the Reserve Bank of India (RBI) has certified several entities as "Account Aggregators" (AAs). These AAs are authorized to provide account aggregation services in India and are subject to regulatory oversight by the RBI.

RBI has issued guidelines on account aggregation, which refers to the process of collecting and combining the financial data from multiple accounts held by an individual or a business at different financial institutions into a single, comprehensive view.

RBI has recognized the potential benefits of account aggregation for consumers, such as improved financial management and easier access to a complete view of their financial situation.

These guidelines require account aggregation service providers to implement appropriate security measures to protect the privacy and security of financial data, and to obtain explicit consent from consumers before collecting and sharing their financial data. The RBI has also established a framework for the regulation and supervision of account aggregation service providers in India.

To quote Ministry of Finance "As many as 94 financial institutions have onboarded the account aggregator platform as financial information users (FIUs), the government has informed the Parliament. Of the 94 financial institutions that have onboarded the account aggregator platform as FIUs to date, 73 are regulated by the Reserve Bank of India (RBI), while the Securities and Exchange Board of India (SEBI) regulates 10 of them"

How to evaluate an Account Aggregator?

There are several metrics that may be used to evaluate the performance of an account aggregator, depending on the specific goals and objectives of the aggregator and the needs of its users. Some possible metrics that may be used to evaluate the performance of an account aggregator include:

1. User satisfaction: This could be measured through surveys or other means of gathering feedback from users of the account aggregator.
2. Data accuracy: It is important for account aggregators to provide accurate and up-to-date information to their users. This could be measured through regular checks of the data provided by the aggregator.
3. Security: The security of financial data is a key concern for account aggregators. Metrics related to security could include the number of data breaches or instances of unauthorized access to financial data.
4. Speed: There is a fixed TAT as defined by Sahamati, for e.x 12 months of data is 180 seconds. All FIP has to adhere to this
5. User engagement: The level of engagement with the account aggregator by its users could be a good indication of its value and usefulness. This could be measured through metrics such as the number of active users, the frequency of use, and the length of sessions.

Account Aggregation - A threat or a boon?

There is some debate about whether account aggregation poses a threat to financial institutions or other stakeholders. Some people argue that account aggregation could potentially disrupt traditional financial services and undermine the business model of banks and other financial institutions.

This is because account aggregation platforms can make it easier for consumers to switch between financial products and providers, potentially reducing the loyalty of customers to a particular financial institution.

On the other hand, some people argue that account aggregation could actually benefit financial institutions by providing them with valuable data and insights into customer behavior.

This could allow financial institutions to better understand and meet the needs of their customers, potentially improving customer satisfaction and loyalty.

Overall, the impact of account aggregation on financial institutions and other stakeholders is likely to depend on a variety of factors, including the specific business model of the institution and the competitive landscape in which it operates.

Check out TSP for Account Aggregator - A Consent-based account data management and transfer platform by Perfios.

To take a demo, write to us at [email protected]

About Perfios:

We are India’s largest SaaS-based B2B fintech software company enabling financial institutions across the world to take informed decisions in real-time.

We specialize in real-time credit decisioning, onboarding KYC automation, company, individual & legal due diligence, credit underwriting, monitoring, lead generation, customer data enrichment, litigation automation and so much more.