In India, getting credit has always been a major issue. Although banks and Non-Banking Financial Companies (NBFCs) have extended their presence in Tier 2/3 and beyond areas over the past ten years, customers with little to no credit history have only recently been able to obtain access to financial services. Without solid evidence, lenders assume greater risk and consequently charge higher interest rates, processing fees, and other costs, making it challenging to meet the credit needs of lower-income sectors.
The Reserve Bank of India (RBI)’s investments in and promotion of the Account Aggregator (AA) framework to democratize credit by bridging the gap between financial service providers and India’s millions of borrowers, is a positive step forward in helping to make reliable data available for assessment and underwriting.
Account Aggregators allow users to integrate their bank accounts, which compile all of the user’s financial data in one place for convenience.
Data permeates everything and is everywhere. In contrast to the past, when there were only a few ways to often share users’ financial information, financial institutions now leverage their customers’ data that is available from a variety of sources to provide solutions for a specific set of use cases. Our experience has shown that clients want ease, speed, and security and this need is met by the account aggregation framework.
The potential to combine data from several sources in one location for optimal usage is one of the biggest advantages of digital technologies’ interconnection. Consumer expectations for speed, safety, security, and convenience have changed as a result of cutting-edge technologies and the disruption brought about by on-demand aggregators and marketplaces in the financial services industry. As of Nov. 22, 2.58 million accounts have already been linked, and the ecosystem has successfully fulfilled 2.5+ million consent requests.
Banking data acquired via the account aggregators focuses on pain points like the authenticity of the data. Think of every single time you had to log in to your net banking portal, go through the generate statement process, and then mail or print and share it. That is now officially a thing of the past for strategies leveraging this new ecosystem. Once you hear it, and actually experience the flow, you’ll despise going back to the status quo of document sharing.
Account Aggregator offers the necessary components for the user to connect to all of their bank accounts while concentrating on personal finance management. We think that the user-friendly user journeys and user experiences that assist users in setting and monitoring financial goals using bank statements obtained from account aggregators will be crucial to the ecosystem’s acceptance and, ultimately, to users’ ability to manage their finances.
One of the BFSI ecosystem’s most innovative and exciting new developments is the Account Aggregator framework. Fetching users’ bank statements has never been this simple thanks to account aggregators, in contrast to the underwriters’ old method. Building the bank statement analyzer report on top of this data will definitely help underwriters understand the borrower’s intent and capacity to repay the loan, ultimately helping them make smarter, faster, and more accurate decisions.
Since verified information is transferred directly from the Financial Information Provider (FIP) to the Financial Information Users (FIP), we also anticipate that document and identity fraud will decrease with AA.
Now that it has practically become a habit, I spend a whole week exchanging documents with my CA in order to share all investment proofs and different statements. There are so many other things I would love to do that week, and perhaps we’ll start seeing some of them at least in April with things like bank statements and interest certificates.
Overall, post-AA India’s financial services industry will undoubtedly be something remarkable, demonstrating to the rest of the world how Open Finance should be done. Enough people and businesses are operating as TSPs around the clock to make this change possible.