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THE ACCOUNT AGGREGATORS

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Recently,  India`s  8 major banks like SBI, ICICI Bank, Axis bank, IDFC First Bank, Kotak mahindra bank, HDFC  Bank, IndusInd Bank and Federal Bank – joint the Account Aggregator [AA]  network that will enable customers to easily access and shared their financial Data.

WHAT IS AN ACCOUNT AGGREGATOR [AA] ?

Account Aggregator is a non-banking financial company engaged in the business of providing, under a contract, the service of retrieving or collecting financial information pertaining to its customers.

In simple terms, the AA platform allows the data of individuals to be collected with their consent and shared among financial institutions.

It also enables the free flow of data between banks and financial service providers, the licence for AAs is issued by RBI and the financial sector will have many AAs.

ABOUT ACCOUNT AGGREGATOR FRAMEWORK

1. This framework has been under discussion since 2016 and in the testing phase for some time and now it will be open to all customers.

2. It was created through an inter-regulatory decision by RBI and other regulators including Securities and Exchange Board of India, Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Regulatory [PFRDA] through an initiative of the Financial Stability and Development Council [FSDC].

3. The AA framework allows customers to avail various financial services from a host of providers on a single portal. It is based on a consent method, under which the consumers can choose what financial data to share with which entity.

ADVANTAGES OF ACCOUNT AGGREGATOR

1. It reduces the need for individual`s to waiting in long bank queues.

2. The primary benefit of Account Aggregation is the ability for consumers to access their account information and financial insights, anytime, anywhere.

3. An Account Aggregator is a financial utility for secure flow of data controlled by the individual.

4. Account Aggregators are an exciting addition to India`s digital infrastructure. It will allow banks to access consented data flows and verified data. It will help banks reduce transaction costs.

5. It will also help in reduce frauds and comply with upcoming privacy laws.

HOW DOES ACCOUNT AGGREGATOR WORKS?

1. It has three-tier structure: Account Aggregator, FIP [Financial Information Provider] and FIU [Financial Information User].

2. An FIP is the data fiduciary which holds customers data. It can be a bank, NBFC, mutual fund, insurance repository or pension fund repository.

3. An FIU is a lending bank that wants access to the borrowers data to determine if the borrower qualifies for a loan.

4. Banks play a dual role- as an FIP and as an FIU.

5. AA shouldn`t support transaction by customers but should ensure appropriate mechanism for proper customer identification.

6. AA should share information only with customer to whom it relates or any other financial information user as authorised by the customer.

OBJECTIVES

1. According to iSpirt, a think tank for the Indian software products Industry, it creates secure, digital access to personal data at a time when Covid-19 has led to restrictions on physical interaction.

2. It reduces the fraud associated with physical data by introducing secure digital signatures and end to end encrypted.

CONCLUSION

The ACCOUNT AGGREGATOR framework is an excellent initiative that will compile all the digital footprints of the customer at one place and make it easy for lenders to access. It will enable to provide very quick turn- arounds to customers.

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