India is making big strides in becoming a top digital economy. Thanks to initiatives like Digital India, more people can use digital payments and online services. But handling money across different places can be tricky. That's where Account Aggregator (AA) comes in—it's a game-changer in finance.
Account Aggregator is changing how banking works in five important ways:
Making customers happier
Earning more money
managing risks better
Reducing bad loans
And saving costs.
An Account Aggregator (AA) is a regulated entity under the RBI, holding an NBFC-AA license. Its role is to facilitate the secure digital access and sharing of information by individuals from one financial institution, known as the Financial Information Provider (FIP), to any other regulated financial institution within the AA network, referred to as the Financial Information User (FIU).
It's important to note that data sharing requires the explicit consent of the individual. Account Aggregation, or bringing together financial data, is when information from all your accounts (like checking, savings, CDs, and brokerage) is gathered in one place. Apps like Quicken or Mint provide this service, making them account aggregators.
The Account Aggregator network includes banks, NBFCs, NBFC-AAs, third-party services, and more. Banks share financial data, lenders seek financial data, NBFC-AAs connect banks and lenders, and third-party services collaborate with AAs.
Account Aggregation usually happens within a single financial institution, but users can include certain assets held outside if they agree. Personal finance services let customers 'aggregate' data from all their accounts, like savings, checking, and brokerage, across different institutions.
To use this service, customers typically need to provide their account credentials. The software then downloads data from each account for aggregation. Usually, the software only accesses balance and transaction records.
For security, many services don't allow users to make transactions through the aggregate portal. Some software used by financial advisors goes beyond, pulling in additional data like home values, categorizing cash flows, and showing debt in the overall financial picture.
To connect to the Account Aggregator network, the person's bank simply has to join. At present, eight banks—Axis, ICICI, HDFC, IndusInd Bank, State Bank of India, Kotak Mahindra Bank, IDFC First Bank, and Federal Bank—are already part of it.
Onemoney is the first one to get a license, and others like Cams Finserv, FinSec AA Solutions, and Cookiejar Technologies have also been given the green light. The idea, according to the RBI, is to create a platform where financial companies can ask for permission to use your data to improve their products.
