From UPSC perspective, the following things are important :
Prelims level : Account Aggregator Network (AAN) and its regulation
Mains level : Account Aggregator Network (AAN)
The Account Aggregator system in banking has been started off with eight of India’s largest banks. In this newscard, we shall learn it in a FAQ manner.
What is an Account Aggregator?
- 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.
- 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 a granular, step by step permission and control for each use of your data.
How would it improve an average person’s financial life?
- India’s financial system involves many hassles for consumers today.
- This includes sharing of physical signed and scanned copies of bank statements, stamp documents, or having to share your personal username and password to give your financial history to a third party.
- The AAN would replace all these with a simple, mobile-based, simple, and safe digital data access & sharing process.
- This will create opportunities for new kinds of services — eg new types of loans.
- The individual’s bank just needs to join the Account Aggregator network.
How is AAN different to Aadhaar eKYC data sharing?
- Aadhaar eKYC and CKYC only allow sharing of four ‘identity’ data fields for KYC purposes (eg name, address, gender, etc).
- Similarly, credit bureau data only shows loan history and/or a credit score.
- The AAN allows sharing of transaction data or bank statements from savings/deposit/current accounts.
What kind of data can be shared?
- Today, banking transaction data is available to be shared (for example, bank statements from a current or savings account) across the banks that have gone live on the network.
- Gradually the AA framework will make all financial data available for sharing, including tax data, pensions data, securities data (mutual funds and brokerage), and insurance data will be available to consumers.
- It will also expand beyond the financial sector to allow healthcare and telecom data to be accessible to the individual via AA.
Can AAs view or ‘aggregate’ personal data? Is the data sharing secure?
- Account Aggregators cannot see the data; they merely take it from one financial institution to another based on an individual’s direction and consent.
- Contrary to the name, they cannot ‘aggregate’ your data.
- AAs are not like technology companies which aggregate your data and create detailed profiles of you.
- The data AAs share is encrypted by the sender and can be decrypted only by the recipient.
- The end to end encryption and use of technology like the ‘digital signature’ makes the process much more secure than sharing paper documents.
Can a consumer decide they don’t want to share data?
Yes. Registering with an AA is fully voluntary for consumers.
- If the bank the consumer is using has joined the network, a person can choose to register on an AA, choose which accounts they want to link, and share their data.
- A customer can reject a consent to share request at any time.
- If a consumer has accepted to share data in a recurring manner over a period (eg during a loan period), it can also be revoked at any time later as well by the consumer.
Duration of the data shared
- The exact time period for which the recipient institution will have access will be shown to the consumer at the time of consent for data sharing.
How can a customer get registered with an AA?
- One can register with an AA through their app or website.
- AA will provide a handle (like username) which can be used during the consent process.
- Today, four apps are available for download (Finvu, OneMoney, CAMS Finserv, and NADL) with operational licenses to be AAs.
- Three more have received in principle approval from RBI (PhonePe, Yodlee, and Perfios) and may be launching apps soon.
- A customer can register with any AA to access data from any bank on the network.
Does a customer need to pay the AA for using this facility?
- This will depend on the AA. Some may charge a small user fee.
- Some AAs may be free because they are charging a service fee to financial institutions.
What new services can a customer access if their bank has joined the AA network of data sharing?
The two key services that will be improved for an individual is access to loans and access to money management.
- If a customer wants to get a small business or personal loan today, there are many documents that need to be shared with the lender.
- This is a cumbersome and manual process today, which affects the time taken to procure the loan and access to a loan.
- Similarly, money management is difficult today because data is stored in many different locations and cannot be brought together easily for analysis.
- Through Account Aggregator, a company can access tamper-proof secure data quickly and cheaply, and fast track the loan evaluation process so that a customer can get a loan.
- Also, a customer may be able to access a loan without physical collateral, by sharing trusted information on a future invoice or cash flow directly from a government system like GST or GeM.