One of the top challenges customers and financial services providers face is the need for a flawless, safe method to check and transfer financial information. For example, when loan seekers request business loans on lending applications, they are required to provide enough details to prove their creditworthiness. The loan seeker will need to reinforce or consolidate the data.
Moreover, this procedure can contain various errors. Collecting all the data may consume more time. The data might need to be more varied, sufficient, and filled with breaches. The procedure could become time-wasting, resulting in an extended inversion or turnaround time for loan processing.
The introduction of the RBI Account Aggregator Framework aims to identify challenges in data sharing and ease FinTech’s credit risk evaluation procedure. In this post, we will explain significant aspects of this framework and its potential impact.
Why Are Account Aggregators Required in the First Place?
The fintech industry presently goes through many challenges, such as:
1. Quick Access to Data
Customers need help accessing all their financial information in a single place. Thus, they need sufficient time to verify and share important financial details, which plays an essential role in assessing credit risk.
2. Rejected or Refused Applications
The financial details allocated by customers may have many gaps, making it inadequate for the loan applicant to enable credit and different financial services, growing the number of refused applications.
3. Lack of Credit History
Various customers need credit history, thus keeping them out of the loan ecosystem. Fintech companies are targeting to resolve this problem and provide comprehensive services. These challenges grow the turnaround time for loan processing, resulting in customer drop-offs and prospective business losses for Fintech companies.
What Specifically Is an Account Aggregator?
An account aggregator (AA) is a non-banking financial company (NBFC) that retrieves or gathers data linked to a customer’s financial assets from a Financial Information Provider (FIP), such as their NBFC or bank.
Only RBI-associated account aggregators with AA permission are allowed to provide this service.
The FIP has entry to their financial details, which are arranged and transmitted to their preferred service provider, the FIU.
Customers of financial services or MSMEs can benefit from the services of an AA by registering with them.
Today, various public and private banks have listed themselves on the RBI Account Aggregator Framework to allow accessible data allocation with a customer’s selected account aggregator.
Essential Features of the RBI Account Aggregator Framework
Here are a few significant features of the RBI Account Aggregator Framework:
1. Data Encoding
The RBI Account Aggregator Framework prefers data security and privacy. To ensure this, AAs are not permitted to accumulate, process, or market consumers’ information, and transferred data is encoded to ensure its security.
2. FIPs’ Spectrum
By this time, FIPs can involve NBFCs, Banks, pension fund repositories, mutual fund depositories, and pension and insurance repositories.
3. FIUs Can Also Be FIPs
A few entities, like banks, can be listed as FIPs (Financial Information Providers) and FIUs (Financial Information Users). A private bank may be listed as a FIP as it involves many bank accounts. Furthermore, a lender offering loans may also list as an FIU to verify financial details from various sources.
4. Customers’ Permission Is Important
The framework’s base is significantly based on customer permission. No information can be sent without their consent, and they have full control over what information, how much, and when it will be allocated.
Benefits of the RBI Account Aggregator Framework
As UPI reformed the payment system, Account Aggregator can offer financial services, such as loans and credit. By employing the present digital infrastructure, the facilities can be made more flawless and accessible to all.
- Easy
Account Aggregators make it easy for users to gather data and service providers to access data.
- Fast
AA lets quicker processing and access to different financial services and products.
- Inclusive
With your complete financial profile in a single place, service providers can better verify your requirements.
- Real-Time
Each synchronised account’s data is updated and accessible online, decreasing the feasibility of mistakes.
- Confirmed
Financial information is delivered straight from approved accounts, so data mistakes are decreased.
- Clear
Aggregation increases clarity or transparency by offering a clearer image of your finances.
Use Cases of Account Aggregators in Different Industries
The framework is much wider than just sharing bank statements. It includes the allocation of a user’s financial data ( insurance, investments, card details, etc.) via a full-proof system. FIUS (Financial Information Users) and FIPS (Financial Information Providers) share it.
As data allocation increases, several new use cases emerge, and as new users are allowed with AA accounts, new use cases come out.
Let us consider some of the most general use cases of account aggregators in different industries.
1. Financial Services Providers
One of the most general and significant industries in which Account Aggregator services are employed is the financial services industry. The AA framework has already been established to provide benefits to MSMEs and underserved people in the country.
2. Lending Services Providers
In India, P2P lending, DBUs (digital banking units), POS (Point-of-Sale) lending, microlending, and various current credit services are accessible. These current lending services can offer customer-oriented services with conventional lending services. All thanks to Account Aggregators easing the sharing of financial data.
3. Wealth Or Personal Finance Management
Thanks to AAs, wealth or personal finance management solutions have changed a lot. Customer onboarding time has decreased significantly from several days to a few hours and, in some conditions, only a few minutes.
4. Account Reconciliation
AA can bring back bank statement information in real-time, making bank account reconciliations, supplier accounts, and customer dues much simpler. Organisations can use AA-facilitated accounts to verify in real-time, even if a particular transaction is shown in the bank statement.
Final Takeaways
The RBI account aggregator framework decreases the manual efforts and security problems involved in allocating comprehensive, sensitive data that can prospectively affect the financial access and operating cycles of different businesses.
With access to sufficiently appropriate data, FinTech platforms can assess financial statements and process risk evaluations and loans faster and properly. The potential impact is that Financial organisations can accelerate their services and play an important role in prompting financial activity in India.
Anumati, the best online account aggregator, offers a user-responsive bank statement analyser that aims to ease the analysis procedure via automation. This allows the results to be sent in minutes. This interface also provides actionable views on a simple-to-use dashboard, assisting businesses in making well-versed lending decisions.