Account Aggregators are like consent-managers which facilitate the sharing of data securely from FIPs and FIUs.
Financial Information Providers(FIP) are the organisations which have store financial data stored. eg: banks, insurance companies, mutual funds etc.
Financial Information User(FIU) are the ones to consume the same financial data to provider various services. eg: banks, lending companies, personal wealth management companies, etc.
What are some characteristics of AA?
- Account Aggregator's act as a conduit and do not process any data.
- It is data-blind and the data passed through it is encrypted.
- AA's don't store any customer's data to avoid any potential misuse.
An account aggregator will facilitate the process of consent similar to how UPI facilitates the transfer of funds. The FIUs can request the access to data through AAs specifying the purpose of requirement and the time period for which the data must be used. The customer, may choose to accept or reject this request. On acceptance, the data is shared from the FIPs to the FIUs. The data remains to be within the system available to the FIUs for the specified time frame and ejected from the system automatically on expiry. The customer can revoke this access anytime, if needed.
Account Aggregator framework
Why we need AA?
- Standardised financial information sharing and access across all fintech players with best practices of data storage and security.
- Clear data consent and logs with entire control by the consumer. It is based on Data Empowerment and Protection Architecture (DEPA) which is predicated on the notion that individuals should have control over how their personal data is used and shared.
- Higher financial inclusion and providing personalised services and products.
The question arises, why will FIPs share data with FIUs who might me potential service providers for their existing customers? The answer remains simple, to be within the ambit of AA and have access to financial data, one needs to provide data as well. Hence, the FIPs and FIUs are interchangeable roles.
Investments and Borrowing in AA framework
AA enables better tracking and monitoring of investments. Manual updation of transactions and holdings can be tedious. The AA will enable traditional and online financial advisors to access, process, and derive insights from financial information obtained after consent. The framework also enables implementation of Unified Nominations Register(UNR). A UNR is a register containing the investor's nominee details across all financial assets.
The system will also enable lenders to lend money to individuals with little or no credit history. Traditionally lending institutions need access to bank statement PDFs to extract the cash inflow and outflow of the borrower before lending. Using this framework, this will streamline the process for both the parties to furnish only the information which is necessary for checking up on credibility.
Account Aggregators is presumed to be the next big thing after UPI and the people are very bullish on the this space to change how we perceive financial data. Sahmati is non-for-profit private limited company with a collective of the Account Aggregator Ecosystem. There are already some players in the space all set to revolutionise the handling of financial data.