ACCOUNT AGGREGATOR SYSTEM- THE REVOLUTIONARY FINANCIAL DATA SHARING SYSTEM
1. What is an Account Aggregator?
The account aggregator ecosystem, which went live in September 2021, aims to democratise credit access in the country. An Account Aggregator (AA) is a type of RBI regulated entity (with an NBFC-AA license) that helps an individual securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution in the AA network. Data cannot be shared without the consent of the individual.
The Account Aggregator System network is a financial data-sharing system regulated by the Reserve Bank of India (RBI). There will be many Account Aggregators an individual can choose between. Account Aggregator replaces the long terms and conditions form of ‘blank cheque’ acceptance with granular, step-by-step permission and control for each use of your data.
- Account Aggregator is an interoperable data, blind consent manager
- AA cannot read consumer data; they cannot sell consumer data.
- Account Aggregators enable consumers to securely share and even revoke data once shared.
- AAs have a fiduciary duty to consumers and are RBI-regulated entities, sharing digitally signed and encrypted data.
2. Central Govt push to onboard public sector banks into the Account Aggregator System
Finance Minister Nirmala Sitharaman has directed all public sector banks (PSBs) to onboard the account aggregator system by the end of July 2022. The account aggregator system is an undertaking of the central government to ease access to credit and improve credit delivery.
Currently, nine private banks are already live on the system, which includes HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank, among others. However, only one government bank, the Union Bank of India, has joined the account aggregator system so far, with a few more state-owned lenders working to join the system.
3. An overview of the account aggregator ecosystem
In the financial services domain, account aggregation or financial data aggregation is a technique that involves the collection, assembly and synthesis of information from multiple accounts, such as loan/credit accounts, savings and current accounts, credit cards and investment accounts (including mutual funds, demat accounts, brokerage accounts); government accounts such as public provident fund and income tax return data; and supplementary business or consumer accounts such as those of e-commerce, food or mobility aggregators in a single place. The data collection, collation and sharing are enabled through open application programming interface (API) connections.
The account aggregator system can be best explained through the following chart.
Recommended read on business finance
4. The stakeholders in the account aggregation ecosystem
The system has three primary constituents – the Account Aggregator (AA), the Financial Information User (FIU) and the Financial Information Provider (FIP).
a) Account Aggregator (AA)
An AA is a new class of NBFC approved by the Reserve Bank of India (RBI) to manage consent for financial data sharing of users. The AA came into being through an inter-regulatory decision by several regulatory bodies: the RBI, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA) through Financial Stability and Development Council (FSDC). The primary responsibility of AAs is to facilitate the transfer of users’ financial data with their explicit consent. This primarily includes the transfer, but not storing, of data. An Account Aggregator is ‘data-blind’, and data transmitted will be end-to-end protected. Also, an Account Aggregator does not and cannot store any user’s data. Thus, It helps businesses and individuals collate and share data digitally in a secured and controlled manner, thereby assuring the user’s integrity, confidentiality, and privacy.
b) Financial Information Provider (FIP)
Any supervised financial sector institution that offers financial services and products such as banking, lending, asset management and insurance is classified as a financial information provider (FIP).
c) Financial Information Users
An institution that is registered and supervised by any of the financial sector regulators (across banking, lending, financial planning and investments, insurance and pension— the Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA) is considered a financial information user (FIU). FIUs can solicit consent from a user by providing details of the data to be captured through an account aggregator identifier.
The FIUs, such as banks, lending agencies, and NBFCs, can receive digitally consented data from Financial Information Providers (FIPs). FIPs are institutions that oversee user data. These are typically the banks, mutual funds, pension funds, and some NBFCs that represent the source of personal or business data which the FIUs can access via requests through an Account Aggregator. The types of financial data are specified in the master directions notified by the RBI’s Department of Non-Banking Regulation (DNBR).
The working of the system is fairly simple. In the AA app, users need to link their FIPs by which a user can share the data from that FIP with an FIU. Currently, only bank accounts can be linked and not all banks are live in the ecosystem yet. Later on, GST data, mutual fund data, etc. are also expected to be included in the same.
5. Enhanced Encryption of user’s data
The system aims to create a third-party trusted source of information that allows seamless data flow between all players. In various cases, once customers’ data is shared with a bank for one purpose, it gets circulated among other departments too. For example, if a customer shares her/his data for a housing loan, it might happen that the vehicle loan department may get access to it. But the AA system prohibits that.
Customers can choose which department their data will be shared with and the system minimises the chance of data sharing even within various departments of the same bank. The system enables customers to offer authentic information in a controlled and managed environment to all the players in the ecosystem, including banks. It helps customers make real-time lending decisions in multi-bank personal finance management (PFM) and maintain a consolidated financial dashboard. It also enables wealth assessment and planning, all the while ensuring encryption.
6. What are the Financial Assets covered under the Account Aggregator System?
The business of an account aggregator” is the business of providing under a contract, the service of, retrieving or collecting information of its customer pertaining to such financial assets. The term Financial Assets means and includes the following:
- Bank deposits including fixed deposits, saving deposits, recurring deposits and current deposits,
- Deposits with NBFCs
- Structured Investment Product (SIP)
- Commercial Paper (CP)
- Certificate of Deposit (CD)
- Government Securities (Tradable)
- Equity Shares
- Mutual Fund Units
- Indian Depository Receipts
- CIS (Collective Investment Schemes) units
- Alternate Investment Funds (AIF) units
- Insurance Policies
- Balances under the National Pension System (NPS)
- Units of Infrastructure Investment Trusts
- Units of Real Estate Investment Trusts
- Any other asset as may be identified by the Bank for the purposes of these directions, from time to time;
7. Data Security Guidelines for AA
The following are the data security guidelines issued by RBI to be followed by all the Account Aggregators.
- The business of an Account Aggregator will be entirely Information Technology (IT) driven.
- The technology should also be scalable to cover any other financial assets or financial service providers as may be identified by Bank in future.
- There shall be adequate safeguards built into its IT systems to ensure that it is protected against unauthorised access, alteration, destruction, disclosure or dissemination of records and data;
- Appropriate measures for Disaster Risk Management and Business Continuity shall be in place.
- Information System Audit of the internal systems and processes shall be in place and shall be conducted at least once in two years by external auditors. The report of the external auditor shall be submitted to the Regional Office of the Department of Non-Banking Supervision of the Bank, under whose jurisdiction the Registered Office of the Account Aggregator is located, within one month of submission of the report by the external auditor.
8. Duties and Responsibilities of an Account Aggregator
RBI has stipulated the following duties and responsibilities for Account Aggregators
- Account Aggregator shall ensure that the providing of services to a customer who has made a specific application for availing such services, would be backed by appropriate agreements/ authorisations between the Account Aggregator, the customer and the Financial Service providers.
- Account Aggregator shall not support transactions in financial assets by customers.
- Account Aggregator shall ensure appropriate mechanisms for proper customer identification.
- Account Aggregator shall share information as referred to under paragraph 3(iv) only with the customer to whom it relates or any other person authorized by the customer. The process of authentication of the authorization has to be robust.
- Account Aggregator shall not undertake any other business other than the business of account aggregator. Deployment of investible surplus by an Account Aggregator in instruments, not for trading, shall however be permitted.
- No financial asset-related customer information pulled out by the Account Aggregator from the financial service providers should reside with the Account Aggregator.
- Account Aggregator shall have a Citizen Charter that explicitly guarantees protection of the rights of a customer. The Account Aggregator shall not part with any information that it may come to acquire from/ on behalf of a customer.
- In the event of any difference in the position of financial assets in the statement generated from the Account Aggregator and the books of the Financial Service provider, the position as reflected in the records of the Financial Service provider shall be considered correct.
9. Customer grievances mechanism by AAs
- An account aggregator shall have in place a Board approved policy for handling/ disposal of customer grievances/ complaints. It shall have a dedicated set-up to address customer grievances/ complaints.
- Customer complaints shall be handled/ disposed of by the Account Aggregator within such time and in such manner, as provided for in its Board-approved policy, but in any case, not beyond a period of one month from its receipt.
- At the operational level, the Account Aggregator shall display the following information prominently, for the benefit of customers, on the website and at the place/s of business:
- the name and contact details (Telephone / Mobile nos. as also email address) of the Grievance Redressal Officer who can be approached by the public for resolution of complaints against the company.
- that if the complaint/dispute is not redressed within a period of one month, the customer may appeal to the Bank.
10. List of RBI licenced Account Aggregators
List of AAs with an operational licence from RBI as on Jan 31 2022
|Sr No||AA Company Name|
|2||Cookiejar Technologies Private Limited (Product titled Finvu)|
|3||FinSec AA Solutions Private Limited (Product titled OneMoney)|
|4||NESL Asset Data Limited|
|5||Perfios Account Aggregation Services Pvt Ltd (Product titled Anumati)|
AAs with In-Principle Approval: Account Aggregators who have received In-Principle approval from RBI are listed below.
|Sr No||AA Company Name|
|1||Agya Technologies Private Limited|
|2||CRIF Connect Pvt. Ltd|
|3||Dashboard Account Aggregation Services Private Limited|
|4||Digio Internet Private Limited|
|5||NSDL E-Governance Account Aggregator Limited|
|6||PhonePe Technology Services Private Limited|
|7||Tally Account Aggregator Services Private Limited|
|8||Unacores AA Solutions Private Limited|
- All about Private Debt
- Cash flow statement
- Free Cash Flow to Equity (FCFE)
- Weighted Average Cost of Capital (WACC)
- All about factoring
About the author