What is an Account Aggregator and why it is a financial revolution?
The blog tells you how Account Aggregator platform can help India’s digitization agenda by providing better credit reach to individuals and MSMEs, optimizing financial planning and improving other areas of critical importance to the financial services system. AA framework can benefit millions in the country with its robust and scalable architecture. Read on to know what is account aggregation and how every Indian citizen can benefit from it.?
Confused Deepa – Case study 1
Deepa is a corporate lawyer who has managed to save most of her take home pay.?The problem however is that her money is in random investments done without a proper plan or any detailed research. The outcome is that her wealth is spread over many investments in a fragmented state. Presently, she wants to buy an apartment that she likes very much, but has no clear idea of what her real financial situation is. She is unable to decide if she could afford it and if she could, she is unsure if she should finance it with her personal funds or use borrowed funds and how much of each, if chooses both modes.
?Barkha’s concerns – Case study 2
Barkha runs a home based food business. She has been thinking of hiring help as well as upgrading some of her kitchen equipment. She is planning to apply for a loan for funding the upgrades. Her DeMat account opening, insurance payments and SIPs were all done through a single bank as she did not want the hassle of dealing with multiple service providers for multiple products. However she wants to avail the new loan from a different institution which offers better rates. She is however anxious about all the paperwork that initiating a relationship with a new lender entails.
Pavan’s challenge – Case study 3
Pavan is an NRI working in the US. He came down to India when his father passed away. In his time of grief, he also has the unwelcome task of figuring out his deceased father’s financial affairs. Bringing to order the finances of a deceased person who has multiple bank accounts, demat accounts, insurance policies, mutual fund holdings and loans spread across various institutions can be a daunting task. The challenge is that Pavan has no idea where the deceased maintained his account, nor know of a single, credible place to start looking for the details.
Let’s explore how signing up with the NBFC Account Aggregator of CAMSfinserv would solve the challenges faced by Deepa, Barkha and Pavan!
What are Account Aggregators and what do they do?
- Account aggregator platform is a highly secure, consent-based and real-time platform that aggregate and provide consolidated information of financial assets.
- They collate all the financial asset information of an individual, with consent, from multiple financial information providers (FIP), encrypt it and securely send it- without storing- in near real time, to the authorized financial information user (FIU)
- They help citizens to digitally share their financial information that otherwise remain in silos across multiple financial institution accounts like Banks, Mutual funds, Insurance, Pension Funds and more.
How does Account Aggregators benefit the end consumer in real terms?
- Providing single window access to all financial information of a user: AAs function as a unified dashboard of all financial data. This dashboard can then be presented to any entity whose services are needed by the user. An individual’s financial information spans across various bank accounts, mutual funds, demat accounts, insurance policies, deposits etc. If individuals like Deepa or Barkha use an Account aggregator, they do not have to endure the struggle of trying to decode various financial data existing with different institutions in silos and arrange this data?in a consumable fashion while seeking loans or making investments. All relevant financial data sets of any one user can be accessed digitally by an authorized entity in a single point without any compromise on the authenticity.
- Making financial decisions easier with comprehensible data: Users get a clear understanding of their financial assets enabling customized credit and investment options. Their financial advisors too are able to form a realistic idea on how to plan and achieve their clients’ financial goals. Understanding the true risk potential helps advisors to optimize the returns by switching allocations accordingly. Scope of analyzing the client’s spending and saving trends become possible with automatic, periodic data updates leading to unique insights for fine-tuning the portfolio in real time. Income tax computation and personal budget setting of users become simpler too with adoption of AA. Deepa would be able to eliminate her dilemmas regarding the apartment purchase quite effortlessly.
- Digital platform to get a comprehensive view of your financial data:?When people opt to go through a traditional route for executing a financial transaction such as a new loan, they have to approach different entities for organizing the necessary paperwork. This cumbersome, manual procedure has a direct impact on timely access to credit. Also there is a potential that such sensitive financial information may get compromised in the process. With Account Aggregation the users have no requirement to share physically scanned and signed copies, get documents stamped and notarized or share usernames and passwords to third parties to provide access to data. Authorized entities get access to tamper-proof secure data, far quicker and cheaper, making the entire credit underwriting processes and portfolio analysis faster and hassle-free. The ease of processing also opens up the opportunity of switching between different service providers for different services. Barkha can go with a loan provider who would give her a better interest rate.
- Conditional and programmable consent to ensure control and data security: Service providers often seek consent to use and transfer data at a time when the consumer is agreeing to participate in an activity with them. Since this consent is sought ahead of time to cover a wide variety of possibilities, it is broad and sweeping in nature. With the AA architecture there is no need for consumers to provide broad sweeping consents. Consent here can be checked, paused or revoked by the user anytime and is valid for only linked accounts. The consent architecture is defined in a programmable way and is not generic. The standards for electronic consent artifacts were formalized by MEITY (Ministry of Electronics and Information Technology) to ensure protection from data misuse. Account Aggregators are built as data-blind entities who cannot view the data that they share, nor leverage it; they merely act as a platform to transfer encrypted financial information from FIPs to FIUs.
- Opportunity to claim legitimate title for financial assets without hassle: Reports state that a whopping 1,50,000 crore?is lying as unclaimed deposits or amounts with various Indian banks and insurance companies as of December 2020. With all the financial asset information available in one place a user or his successor need not fear becoming a victim of the above statistic. If Pavan’s father had signed up with an Account Aggregator, Pavan with access to the AA handle of his father, would get to know the financial asset details in a single click. With that, Pavan’s task is limited to merely establishing himself as the legal heir with banks, insurers or mutual funds.
Nandan Nilekani, chairman of Infosys Ltd and former chairperson of Unique Identification Authority of India (UIDAI)?envisages the Account Aggregator network to be a national population scale infrastructure where millions of people can leverage their digital data to their economic benefit. The robust consent based data sharing system enables the consumers to derive value from their data while maintaining control. This results in the most appropriate use of an individual’s financial information capital.
The Account Aggregator launch marks the arrival of a modern solution developed to solve the wide-ranging problems in sharing of financial data across various financial sectors for all stakeholders involved. CAMSfinserv Account aggregator is one of the initial Account Aggregators to be approved and licensed by the Reserve Bank of India (RBI). To experience CAMSfinserv and get an integrated view of your complete financial information, install the app?https://play.google.com/store/apps/details?id=com.cams.finserv
