As digital technology advanced, data has now been considered an asset, more so in the financial services industry. Account aggregation is relatively a newcomer with the keenness to revolutionize the sharing and managing of financial data. On the whole, enabling the collection, collation, and synthesizing of financial data from multiple sources on one platform, account aggregation opens up a much more comprehensive, efficient, and secure way of accessing financial information. Let us dig into the changing ecosystem of account aggregation in India, understanding its benefits, challenges, and future prospects.
The Concept of Account Aggregation
Account aggregation in the context of financial services describes the processing of collecting and compiling information from different financial accounts—bank accounts, loans, investments, and insurance policies into one platform or access point. This affords individuals, as well as businesses, a view of their total financial position in one place for economic planning and decision processes.
The Account Aggregation Ecosystem in India—An Overview.
The account aggregation ecosystem in India may very well enhance financial inclusion, improve the quality of financial services, and strengthen the privacy and protection of user data through the very design of architecture. The main stakeholders in the ecosystem would be:
- FIPs: Financial Information Providers, such as banks and mutual funds, insurance companies, and platforms for tax filing. They are the entities providing the information that Account Aggregators collate.
- Financial Information User (FIUs)– Organizations whose service offerings require access to people’s financial details. These include, for example, credit underwriting, investment advice, and personal expense management. Examples of FIUs include banks, lending institutions, financial planners and robo–advisors.
- Account Aggregators: The role of the account aggregators is that of an intermediary between the FIPs and FIUs to facilitate secure passage of the financial data from the former to the latter, ensuring data sharing with user consent only and privacy during the passage period.
- Consumers: They are the persons and entities whose financial data is shared.
How does account aggregation work?
Account aggregation begins with a user’s consent for an FIU to access their financial information regarding the user, for example, to a lender or financial adviser. In return, the Account Aggregator will send a request to an FIU, which collects the data from the various FIPs that have responded to the request. It then will enable the data to be securely transferred to the FIU for the purpose of sending custom-tailored financial service information to the user.
The main advantage of the system is that it eliminates the collection and submission of manual documents by the user from various financial institutions. Instead, the complete process is computerized and automated, therefore making it really fast, much more effective, and less prone to errors.
Benefits of Account Aggregation
- Comprehensive Financial Overview: Account aggregation, through the consolidation of several data sources, allows one to view one’s entire financial landscape. These complete, comprehensive perspectives are very important when making well-reasoned financial choices.
- Better Financial Services: FIUs can make use of aggregated data to give more customized and accurate services in terms of specific loan products, investment advice, and financial planning.
- Improved Efficiency: Automated data capture and dissemination both eliminate the time and effort needed in collecting the financial information to speed loan approval techniques.
- Data Security and Privacy: With very strict regulatory provisions, sharing is secure only after express consent by the user, thus reducing the profile risks related to breaches and unauthorized access of data.
- Financial Inclusion: Account aggregation could be very useful to extend financial services to the under-served population as a niche offering, keeping its importance high to those both in rural areas and outside mainstream financial systems.
The Role of Account Aggregators as Consent Custodians
Account Aggregators primarily act as the custodian of user consent. Under the architectural Data Empowerment and Protection Architecture, power is given to the user for full control of the data, deciding who gets to access the data and for what. This user-centric approach will safeguard the data’s privacy and at the same time allow hassle-free information sharing.
Account Aggregators cannot store or sell data, they only channel data around. Consent can be withdrawn by users at any time, and Account Aggregators are under obligation to act on this instantly. These represent the kind of control and transparency needed to build trust in the account aggregation ecosystem.
The Future of Account Aggregation in India
The ecosystem of account aggregation in India is still in a growing and immunizing state.
In the near future, account aggregation is expected to be used in the following additional types of financial services:
- Advanced Wealth Management: FIUs will be in a position to dispense extremely sophisticated wealth management, financial planning, and advisory functions because the data will be integrated and coming from various other sources.
- Cash-Flow-Based Lending: Account aggregation can facilitate a view into the cash flows of an individual and, in turn, offer refined estimates of his creditworthiness, not on asset-based evaluation but on cash-flows. This opens up several possibilities in the lending segment when it comes to individuals and SMEs that have no remarkable value based on their assets but that have a major regular and consistent income stream.
- Personal Financial Management Data may be aggregated to give users real-time insights into their purchasing behaviors to help manage one’s finances.
- Cross-Industry Applications: Although account aggregation today is evolving in the financial sector, its underlying architecture would apply to any sector—health, education, and telecom—wherein it would ease data sharing and improve the way services are rendered.
Conclusion
The future of financial services in India only appears to be growing bigger and brighter, with mass adoption of account aggregation by people and institutions.Account aggregation in India is set to change the way financial services are delivered, with a model for secure, efficient, and user-centric data management in the digital world. With pioneers such as Anumati, people can enjoy control and easily share their financial data, unlocking a host of personalized financial services.
