The Reserve Bank of India recently introduced the account aggregation system in India as a significant part of a movement targeted at the online revolution in financial services. It offers control and access to customers on their financial documents. This post gives complete knowledge to its readers about account aggregation in India.
What is the account aggregation system in India?
This system targets consolidating users’ financial data in real-time with their permission and giving the details to financial organizations. It is predicted to transform the banking sector and can make bank loans more effortless. For instance, if you ask for a personal loan, an account aggregator would gather information regarding your accounts in financial organizations or different assets and put forward this report to the loan provider. Yet, such information can only be gathered by the account aggregator if the consumer gives his approval to this kind of data gathering. Once it obtains approval, the account aggregator gets hold of data straight from the financial organization to furnish it to the loan-providing bank.
Use cases of the account aggregation system
Lending
Account aggregation in India is used to accredit fast and simple loan disbursal. MSMEs get problems in attaining credit because their financial data is not in a collective form. Here account aggregators can be of essential help.
Healthcare
The authority can make health account aggregators, which will see a massive use of the same data allocation methods.
Different constituents of the account aggregation system
The AA system makes up definite constituents known as the financial data users, financial data providers and account aggregators. The financial data users show the lending bank that looks for customers’ information and data to find out even if the debtor is qualified to raise money. Moreover, the financial data provider holds the details regarding the customer. A financial data provider can be an NBFC, bank, insurance depository, pension fund storehouse, etc.
Benefits
The financial system in India includes the operation of different tasks like allocating scanned and signed copies of bank statements or assigning personal user IDs and passwords to financial events to a 3rd party, etc. With the onset of the account aggregation, it will remove such tedious tasks with mobile-based and online safe data access and allocation.
This system provides many benefits like:
1. Unification of abundant data
With the extent of financial data getting massive, it is spread all around financial establishments. This makes it hard for customers or loan providers to recover this data. A large sum of data is collected in the AA plan, kept in one place, and given to the particular bank or loan provider.
2. Improves the effectiveness of credit services
The approved financial information that is accessed would ensure that lenders can simply make good assessments of the financial ability and borrower’s history and process many loan applications quickly.
3. Dependent on customer authorization
As the AA system depends on the customer’s support, customers can choose what they wish to share. The customer puts efforts into significant control of their financial information. Likewise, they can specify a certain time frame until the data distribution can be usable for the bank.
4. Removes the requirement for paperwork
When your financial organization is listed with the AA network, they do not need to do tiresome paperwork whereas applying for loans frequently. All they must do is provide their approval to account aggregators who give the information to the bank where the customer asks for a loan.
5. Completely secure
As the AA system has stern data distribution rules and privacy norms, security is assured for the customer. The account aggregator is hidden as the data that goes through it stays encoded and can be handled only by the organization requesting it. The data allocated by the AAs can be decoded only by the recipient, and this end-to-end encoding and usage of technology such as digital signature make this procedure safer than sharing data in paper form.
Challenges involved in account aggregation system
Only some banks are listed with the account aggregator framework, like Axis Bank, ICICI Bank, HDFC Bank etc. So as some banks are repressed, the financial details that are obtained will give a crooked picture. Thus, the number of banks connected with the AA network, the more it would be an active network.
Additionally, there is a possible risk of data drilling by both financial fact providers in addition to financial data users and possible data abuse in cases where it is not controlled and regulated successfully. Also, there is a need for accuracy on the part of details that they can transfer.
Role of RBI in account aggregation system in India
The AA system got its existence from the RBI and different regulators. The RBI gives AA licenses to offer safe data flow while safeguarding user secrecy. RBI considers the aim of the AA system will be attained when various customers and data providers such as banks and NBFCs are embarked on the account aggregation system.
RBI has reposed rules for the proper working of account aggregation where the data can’t be monetized and removed. It has also assured that the data will be secure and speed up the loan assessment process.
Final Words
Account aggregation in India is hoped to enable people to access and transfer their financial details all over financial organizations securely and fast with due approval. This system can be inflated to different segments in the future, thus, changing the working of those industries. So, in order to know about account aggregation system, you can consider Anumati.