The linking of Aadhaar with Jan Dhan accounts resulted in 400 million transactions in May and June, which brought some relief to migrant workers, said Nandan Nilekani, former Chairman of Unique Identification Authority of India (UIDAI) and a key architect of Aadhaar.

The Infosys co-founder said this during a keynote address at Global Fintech Fest on Wednesday. “It shows the kind of innovation possible due to digitalisation and India as a hot-bed of innovation, especially at a time when migrant workers are under severe stress,” he said.

The push for digitalisation has, especially during the time of the Covid-19 pandemic, resulted in a credit squeeze, which, in turn, has put a lot of stress on the economy.

Shift in lending ecosystem

Nilekani is of the view that the technology architecture used in the Account Aggregator system, along with Open Credit Enablement Network will usher in the next big shift in the lending ecosystem. An Open Credit Enablement Network acts as a marketplace that matches customers with lenders, where the latter can decide to disburse loans and decide on its frequency in a real-time basis.

“For consumption to start, access to credit is needed. This would ensure democratisation of the whole ecosystem where a lender can have access to a marketplace, and even the smallest business can borrow small-ticket loans,” he said.

Access to credit

One of the problems plaguing lending has to do with the unfavourable economics of lending small amounts to business or individuals. The cost of capital is high and as a result the big get to borrow bigger amounts whereas the small can’t borrow small amounts, Nilekani said.

Account Aggregator will allow both individuals and businesses to share their financial data in a digital form with third parties in a safe manner. An Account Aggregator (AA) platform promises to give users full control over how their data will be used, including the right to revoke their consent for use at any time. Also, AAs are not allowed to see, store, or sell data, only collect and transfer it. It is all done through APIs (aopplication programming interfaces).

It can bring about a huge shift not just in lending, but also in wealth management and financial services in the coming years, as people will be able to control who accesses their data and the duration of data, he added. Right now, this data is held in silos across different financial institutions such as banks, NBFCs and lenders.

In the long run, the intention is to make credit accessible to people who may not have been part of the credit ecosystem and help them become part of the formal financial system.

“By accepting digital payments, even street vendors will get access to loans, as the lender can see the transaction history patterns.” said Nilekani.

The two-day Global Fintech fest is host by the Fintech Convergence Council (FCC), the flagship fintech panel of the Internet and Mobile Association of India (IAMAI) along with the National Payments Corporation of India (NPCI) and the Payments Council of India (PCI)

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