Thank you for compiling and explaining the Account Aggregator Framework and its potential challenges.
As a Technology Service Provider (TSP) in the Account Aggregation ecosystem, Fego.ai is excited to highlight the transformative potential of AA for the Indian economy, particularly in including MSMEs and individuals who were previously excluded by the formal financial sector.
Let’s delve into the key points concerning these challenges:
- Without the Account Aggregator (AA) in place, people are exposed to high risks when sharing their bank statements and net banking credentials physically or online with prospective loan providers.
These providers then share individual customer data with third-party companies without consent for verification, etc., resulting in unwanted spam calls from customer service executives who possess the personal and financial data of users.
For example, informal individuals often share their sensitive financial data with multiple financial service providers in hopes of securing a microloan, only to be bombarded with persistent emails and spam calls.
Account Aggregator addresses this issue by giving users complete control over their data. It provides users with a 360° overview of their finances from multiple accounts before allowing them to selectively share this data with trusted financial institutions.
- Financial service providers requesting data permission from users must specify the data validity, frequency of data pull, and purpose of the data pull.
This transparency ensures that users are aware of the financial institution’s name, the purpose and frequency of data access, and the validity of their data with the institution.
Additionally, users have the ability to revoke data access at any time.
- Account Aggregator empowers both users and financial institutions by providing access to financial transaction data from multiple institutions, including banks, insurance companies, investment firms, GSTIN, NPS, EPF, and more.
This holistic view of users’ data enables them to gain a better understanding of their finances, make informed savings and investment decisions, and improve their overall financial well-being.
From the perspective of financial service providers, this comprehensive data allows them to better understand their users, make more informed decisions, personalize their offerings, and enhance targeting strategies.
The seamless data sharing, reduction in user assessment costs and inclusion of underserved individuals & SMEs facilitated by Account Aggregator create a win-win-win situation for the people, government, and financial institutions.
- Account Aggregator provides an opportunity for individuals who have been excluded from traditional financial services due to a lack of collateral or credit history.
By utilizing their cash flow data(pledging transaction data as collateral), these individuals can be included in the financial system.
However, opting for Account Aggregator is not mandatory; it is one of several data-sharing options provided by lending companies.
Users can choose alternative methods and are free to explore other traditional avenues for obtaining a loan, if they prefer.
But opting for Account Aggregator can result in better loan offers from providers.
- The shortcomings of Account Aggregator, such as the misuse of data by financial institutions or the storage of data beyond the specified validity period, are being actively addressed by Sahamati, the governing authority.
They continually improve their guidelines on data access and usage.
Furthermore, with the passage of the Data Protection Bill, the Account Aggregator system gains additional robustness.
- Account Aggregator is built on the Data Layer of the India Stack.
In comparison to the United States and Europe, where data is predominantly held by large corporations, India is making significant strides in the financial sector with the introduction of the Digital Public Infrastructure (DPI) through Aadhar (Identity Layer) and UPI (Payments Layer).
Account Aggregator (Data Layer) represents the next wave of the digital financial revolution.
It is natural for misinterpretations and fears to arise whenever any innovation emerges, as was the case with Aadhar and UPI.
However, with time, people will become more vigilant in responsibly utilizing this innovation, while regulators and governing authorities ensure appropriate usage of data by organizations.