The advent and growth of the account aggregator (AA) ecosystem is going to help monetise the huge digital footprint of citizens, helping turn India from a ‘prepaid’ to ‘postpaid’ economy, said Nandan Nilekani, non-executive chairman of Infosys.

Drawing parallels of prepaid and postpaid mobile plans offered by telecom companies, Nilekani said now credit will also become postpaid, thus increasing access and reach.

“We’re going to see essentially people parlaying their digital capital to improve their lives. We’re going to see a movement from a prepaid economy to a postpaid economy,” Nilekani said, adding that in a postpaid economy, credit will be given in advance with the help of better guardrails and underwriting.

“So we’re going from a few people getting access to credit to the whole country getting access to credit — buyers and sellers,” he said at Sahamati’s Samvaad conference for account aggregators.

Growth unleashed

Multiple transformations are awaited with the growth of the account aggregator system, Nilekani said, adding: “We don’t know what we have unleashed in terms of innovation.” While credit is the first driver of growth, the AA framework is cross-sectoral and will have several use cases beyond financial services.

“Within the financial sector itself, it is across banking, capital markets, insurance, pension and so on, with the same architecture applying to all of them. But it is also cross-sectoral, as it can be applied for skills, educational and health records,” he said.

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The concept of unlocking digital capital or information collateral will lay the foundation for formalisation of the economy by incentivising people and businesses to monetise the system to improve their lives, and also remove information asymmetry by creating a level-playing field for innovation.

‘UPI moment’

The “genius of AA” is that it is an impartial, independent intermediary acting as fiduciary body to ensure that data comes and goes to the right place, without itself accessing the data, he said, terming it the “UPI moment for lending” which not just creates digital but a social transformation and inclusive growth.

At the same event, Chief Economic Advisor V Anantha Nageswaran said the availability of digital infrastructure and data through the AA system will lead to elongated financial cycles and increased penetration of financial services. “If India has to achieve sustained growth rates, more than 6 percent GDP per annum, we need a financial cycle that doesn’t end in half a decade. It has been India’s bane in the past,” he said, adding India needs at least a decade long consistent cycle of over 6 per cent GDP growth to see real transformation at the bottom of the financial pyramid.

However, for this, India will need to have regulatory guardrails in place to prevent misuse of data, mis-selling of financial products and predatory practices, he said, adding “self-policing is the best policing”.