The Indian fintech ecosystem has welcomed the launch of the account aggregator (AA) architecture as a way to facilitate smoother data collection and processing mechanisms. The companies, however, believe that the success of the Account Aggregator initiative will depend both on how far it would help reduce the entry barrier to accessing financial services as well as the customer protection that it would provide.
Speaking at the launch of the account aggregator system, leading fintech companies, seeking to be part of the account aggregator ecosystem and building use cases for it, have shared their expectations from the initiative.
The account aggregator value chain includes financial information providers (FIP) who are banks, asset management companies, pension funds among others and financial information users (FIU) which are companies that will leverage this data to provide services.
FIUs and FIPs must be registered with either the RBI, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI) or Pension Fund Regulatory and Development Authority (PFRDA). Entities have to be ready to share data as FIPs before they can apply to be FIUs.
The Reserve Bank Information Technology Private Limited (ReBIT) has released application programming interface (APIs) and technical standards that the account aggregator service providers will have to adhere to in order to ensure security and authenticity of data.
Facilitating Better Data Sharing
The biggest opportunity that fintech companies see in account aggregator is the ability to provide customers with real-time credit scores which will help the customer and as well as fintech solution providers make better financial decisions.
“Credit score has existed in India since 2004. But people still had difficulty in accessing it but when we started providing credit score as a product it made a huge difference for our customers. We will see a lot of service providers offering account aggregator solutions as well to help customers make smarter financial decisions,” said Naveen Kukreja, CEO of IPO-bound Paisabazaar during a discussion following the launch event.
A problem that fintech startups and NBFCs specifically face in building solutions is the huge disparity in data formats across the financial value chain. Cleaning and preparing the data for credit assessment itself takes a lot of time and effort which also seeps into the cost of product delivery.
“Prior to account aggregator, every bank and financial institution has been using different protocols in order to process data for assessment. As a tech solution provider in this space, you had to worry about the protocols used by the consumer on the other side. Now fintech cos can build products, they only have to worry about building their solutions and not the underlying housekeeping of credit underwriting,” said Shiv Chatterjee, CEO, DMI Finance and NBFC, which is in the process of getting FIP/FIU implementation in the account aggregator ecosystem.
Need For Consent And Customer Awareness
The core concern with the use of digital data assets lies in the safety and security of user data. Nothing screams the challenges of protecting users in an environment where digital data can threaten users than the slew of suicides witnessed in 2020 following harassment by rogue digital lenders.
On one hand, the fintech ecosystem is satisfied with the level of technical security and encryption that account aggregator promises to offer, but it is also vocal about the need to ensure that end-users are better informed about the services.
“Even to use an account aggregator software development kit, FIUs have to be audited and a lot of safeguards have been built into the system. There is a duration for consent as well as a duration for how long the data is allowed to reside with FIUs giving data owners control,” said Sumit Gwalani, cofounder, Fi, a neobank that is in the process of implementing the account aggregator as an FIP/FIU.
However, a large part of the financial goals involve taking these banking and credit solutions to the masses as envisioned by financial inclusion programmes. Such programs involve a business correspondent hand-holding financial customers who may not be financially literate.
The account aggregator systems have to be designed to reduce chances of misuse for customers, said Sucharita Mukherjee, cofounder, Kaleidofin, which is a fintech solutions provider for underserved customer segments and is working on account aggregator use cases.
“It is important to educate customers about the consent architecture at the delivery point itself (AA app) for consumer protection. A smooth customer experience cannot overlook security so we are working with use cases to ensure that the app reads out (in local language) what the customer is consenting to in addition to biometric and OTP checks,” said Mukherjee.
For the process to succeed the way UPI (Unified Payments Interface) has, it is integral that the industry and RBI work towards ensuring stronger product disclosure measures at the point of delivery or access of fintech products using account aggregators, she added.