Conventionally, banking and loan processing in India has been complicated due to uneven allocation or simply unwarranted interest rates. Therefore, An easy and quick system including all the entities is needed at this time.
Similar to the initiation of UPI payment systems, the AA Account Aggregator framework by RBI is ready to change the lending and banking ecosystem in India.
So, this post explains account aggregators, their working, and use cases in detail.
All About Account Aggregators in India
Since the RBI account aggregator framework was set up in India on Sep. 2, 2021, 8 major Indian banks rapidly plunged onto the AA bandwagon. Also, 4 other NBFCs (Non-banking financial corporations) have got approvals from RBI to run as AAs.
Customers can register on any account aggregator by downloading their mobile applications and following the steps. Also, they can select between different AAs.
A significant thing to note here is that customer information is allocated to the Financial Information users ( FIUs) all over the AA account network only after specific approval from the customer, thus making sure proper and safe data practices are tracked.
The simple thought behind AAs is to grab those outside the extent of formal credit by using their digital footprints in each feasible way and giving them access to a more regular method of getting finance.
Likewise, it eases the path for diverse lending organizations to check their creditworthiness effectively and reduce the risk of their loan accounts by identifying Non-performing Assets (NPAs).
What is the AA Account Aggregator System?
Getting loans in India for MSMEs or SMEs has been a tiresome process because of the present lending framework. For people, either many processes or data had to be collected from diverse sources and then need to be allocated to the lending entities.
This normally took much time to get all done, usually resulting in off-the-record transaction consent. So, to control this, RBI has introduced a new system: the RBI account aggregator framework.
An AA account aggregator is an RBI-regulated entity that gives different businesses access to their financial information and assists in sharing the financial data from one financial entity to another in the account aggregator framework safely and digitally.
The most essential part of the AA is that the data cannot be allocated without the person’s approval.
Working of the Account Aggregator (AA) System
AA mainly involves three groups, such as Account Aggregators, Financial Information Providers (FIPs) and Financial Information Users ( FIU). Let us find out what each group offers.
Financial Information Providers or FIPs
FIPs will be gathering the information from the users. These groups include Mutual Funds, Banks, Stock Broking applications, Insurance Companies, NBFCs, etc. They will distribute the user data to FIUs using the Account Aggregator platforms with the user’s permission.
Financial Information Users or FIUs
FIUs are the resources that will be offering services to the user, for example, credit cards, insurance, wealth management, lending, etc., based on the financial information obtained from the FIP. FIUs get digitally signed details from the FIP, protecting its accuracy and clarity
Account Aggregator Platforms or AAs
AAs are the platforms that allow data allocation between FIUs and FIPs. They fundamentally act as a link between the two, allowing data to flow across the entities flawlessly, quickly, safely and digitally.
These platforms cannot employ the data for other purposes and can only arrange and collect the data to be distributed across diverse entities based on the consent given by the user.
A complete range of services will open up because of the rapid data flow, which in response will assist truthful and preoccupied customers via the AA network.
Different Uses of Account Aggregators
Below are some of the latest use cases of account aggregators in India, which will change the way people see these different modes of handling regular finances.
Lending or Loan
A borrower has to go through tiresome manual procedures of getting important documents, getting them approved and providing them in a consolidated format to a bank or NBFC to get a loan. Additionally, there are many touch points included, because of which this data has the risk of being inadequate, damaged or even counterfeit altogether.
AAs make it effortless for customers and lending companies to procure this data through a single click on the account aggregator framework. The AA will yield these documents precisely from diverse agencies and equip the same to the loan provider once a customer approves.
This is a not fully developed yet forthcoming sector in India. This sector will need suitable ways of explicit investment, which indicates an increasing opportunity for wealth managers.
Moreover, wealth managers from the entire India have pursued the conventional sourcing of significant financial data from customers in the tangible or physical form. This procedure does not only waste time but also comes with its individual issues.
AA can fully reform the market of wealth management, in which a client can simply give lifelong approval to their Account Aggregators for granting their fiscal data to their wealth managers and save you many hassles.
Management of Personal Finances
Financial education is rising worldwide, thanks to many platforms available for personal finance management. For instance, different PFM applications need the customer to upload their PDF documents on the app or portal or even provide their login details through the app. This practice is packed with problems like data security problems or issues of cyber fraud and theft.
Thus, having an AA account aggregator set into the system will increase the general public’s courage to take up personal finance decisions.
The data flowing on the AA account framework is encoded to stop any conditions of leakages or misuse, making it one of the most avant-garde digital solutions to the financial system of India. It is a magnificent step towards attaining data empowerment in real terms.
If you are searching for the best account aggregator platform, then Anumati offers end-to-end lending solutions to ease financial study and decision-making for any lending firm or individual.