How AA framework empowers consumers

Getting a loan could get more simple with the Reserve Bank of India’s Account Aggregator (AA) framework having gone live.

Instead of having to submit a long list of documents to the bank, loan applicants can now simply give their consent to digitally share bank statements with the lending bank or fintech – a process that could take days can now be done in just a matter of seconds.

This is just one example and experts say the Account Aggregator framework can help consumers in many more areas such as getting a consolidated view of their financial assets for better money management and availing multiple options to plan better investments and insurance.

“The Account Aggregator ecosystem can help provide authentic, comprehensive and latest data to a lender about a potential borrower. It minimises time and effort to be spent on fraud detection as all data is machine-readable, directly from the source. Bank statements, loan documents, insurance policies and investments can all be verified in this format,” said BG Mahesh, co-founder and CEO of Sahamati, a collective of the AA ecosystem.

“Financial data of a customer is spread across multiple banks, insurers, mutual funds, goods and services tax, other institutions and there is no consolidated view to access this information. AA creates this unified consolidated view,” said Sameer Shetty, President and Head - Digital Business and Transformation, Axis Bank, adding that AA is a secure way of sharing information, which has customer consent and data privacy as its core design principles

Axis Bank is an early adopter of the AA framework and went live with it in November 2020.

What is an AA?

An Account Aggregator is a type of RBI-regulated entity (with an NBFC-AA licence) that helps an individual securely and digitally access and share information from one financial institution he/she has an account with to any other regulated financial institution in the AA network.

“Data cannot be shared without the consent of the individual,” said the Finance Ministry in a recent release.

According to the RBI, the business of an account aggregator means the business of providing, under a contract, the service of retrieving or collecting information of its customer pertaining to financial assets, as may be specified by the bank from time to time, and consolidating organising and presenting such information to the customer or any other person as per the instructions of the customer.

Seven entities had received approval from the RBI to act as AAs, of which, NSEL Asset Data, CAMS FinServ, and Cookiejar Technologies with its product Finvu and FinSec AA Solutions for OneMoney have an operating licence. Three more – PhonePe, Perfios and Yodlee – have received in-principle approval, and there are many more in different stages of applications.

Many of the AA apps are already live on PlayStore and users can sign up for them to manage the consents given and even revoke them.

At present, asset based data, including bank accounts, deposits, mutual funds, insurance policies, pension funds, can be accessed through an AA.

Eight major banks, including State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank and Federal Bank. have already joined the AA ecosystem and account for about 40 per cent of all bank accounts of the country.

Since the AA framework started on September 2, five of these eight major banks have also gone live with it and over 10,000 customers have already used it.

According to Mahesh, the major use cases have been for getting auto loans, small business loans, personal loans and personal finance management. HDFC Bank and Axis Bank have been using AA for auto loans; LendingKart has been using AA for MSME loans, while IndusInd Bank has been using it for Personal Finance Management.

Shetty said being an early investor in the AA framework helped Axis Bank in refining the customer onboarding journey to make it seamless. The lender is working on multiple use cases targeting retail and small business customers.

Sumit Gwalani, co-founder, neobank Fi, which is among the first fintechs to join the AA ecosystem, believes it has myriad use cases. The neobank plans to use the AA ecosystem to help users demystify their finances and plan their saving in a better manner.

“Users have multiple bank accounts, so when they leverage a feature like Ask.Fi, and ask for example how much they’ve spent, or how much they’ve saved, Fi can now give them an answer that scans all their accounts, in milliseconds,” said Gwalani.

“The AA framework is an excellent initiative that will compile all the digital footprints of the customer in one place and make it easy for lenders like us to access it. It will enable us to provide very quick turnarounds to our customers,” noted Manoj Viswanathan, MD and CEO, HomeFirst Finance.

Financial inclusion

Nandan Nilekani, co-founder, Infosys, has likened AA to what UPI did for payments and said that it can lead to democratisation of credit.

“If a business has a digital footprint of its business, then that information can be used by a lender to make a decision to give that SME a working capital loan,” he had said at an online event to launch AA by iSPIRT.

Mahesh also said AA can help in financial inclusion as many people who are new to credit or do not have a bureau score but still have proof of regular income may be able to qualify for a loan.

While there can be many more use cases for account aggregators over time, experts point out that there is also a need to build more awareness among consumers about this.

Also, the AA network will become stronger with more banks and financial entities joining in. Only entities registered and regulated with any of the four regulators can join the AA network.

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