As the government looks to provide more support to India’s fintech industry, private players such as banks and fintech startups are now adopting Reserve Bank of India’s (RBI) account aggregator (AA) framework, which seeks to bring disparate financial customer data onto a single platform.
As of now, banks such as Axis Bank, Bajaj Finserv, ICICI Bank, IDFC FIRST Bank, HDFC Bank, Indusind Bank, Kotak Mahindra Bank, and State Bank of India (SBI) and fintech startups are exploring use-cases of AA. The AA framework makes data sharing easier across services, but only after gaining consent from users. According to RBI, the AA framework will help financial services companies to easily get transactional and banking data of users to optimise product offerings for their customers.
Once users grant consent to account aggregator, financial service providers such as banks, mutual fund providers, insurance providers, and tax filing platforms can request for this data through open application programming interfaces (APIs). The data can be further requested by fintech platforms such as lending, wealth management, personal finance management, and robo-advisory startups to better serve their customers. Notably, account aggregator platforms can’s store the data but can only share it with other financial service providers.
Will Account Aggregator Usher In The Next Fintech Boom?
Previously, Sequoia Capital’s managing director Rajan Anandan had said that RBI’s account aggregator framework will provide a plethora of opportunities to Indian fintech startups. According to him, although UPI has democratised digital payments and provided a space for the fintech startups to grow, the RBI’s account aggregator platform will provide 10x more opportunities to fintech startups.
The framework is expected to be officially launched in May 2020, according to ET. Account aggregator platforms such as Cams Finserv, FinSec AA Solutions and Cookiejar Technologies have already received the required operating permission from the RBI. While these are the early adopters of the platform, industry players are expecting that more companies will join the platform soon. Account aggregators with in-principle approval include Jio Information Solutions Limited, NESL Asset Data, Perfios Account Aggregation Services, Yodlee Finsoft and more.
Lendingkart VP for strategy and new initiatives Deepesh Goyal said that the platform currently receives 1 Mn loan applications from SMEs but due to lack of data only 10% of them gets approved. However, with AA framework, he expects things to get better. “With this, we will be able to cater underserved customers as well as improve our credit underwriting,” he added. Lendingkart has built an AA-based sandbox to test use-cases on the internal data of the company.
Besides startups, banks have also started the pilot for AA framework. For instance, Kotak Mahindra Bank has started to find use cases for the AA framework in banking, broking, wealth management and insurance.
The bank is conducting the trials on its 50K employees after which it’ll move towards its customers. Kotak Mahindra Bank has developed an application where its employees are generating AA IDs to access through their financial portfolios across all platforms of the bank.