GST on AA: Refresher Webinar

Discover how Account Aggregators (AAs) and GST data reshape India’s MSME landscape. From bridging the credit gap by empowering lenders and enabling insurers and investment advisors, AAs hold the key to financial inclusion. Explore the transformative potential for MSMEs, women entrepreneurs, and tier 2/3 cities as we delve into seamless onboarding, cash-flow financing, and data-driven insights. Witness the evolution of financial services driven by AAs and GST data.

Unlocking MSME Growth and Financial Inclusion through Account Aggregators (AAs)Data has become the cornerstone of informed decision-making in the ever-evolving landscape of finance and commerce. For a nation like India with a vast network of Micro, Small, and Medium Enterprises (MSMEs), leveraging data-driven insights can revolutionize lending, insurance, and investment practices. The emergence of Account Aggregators (AAs) as a bridge between the financial ecosystem and GST data has ushered in a new era of seamless, consent-based transactions, thereby addressing critical challenges and opening up significant opportunities.

The GST Data RevolutionIn the pre-AAs era, GST data was accessible through GST Suvidha Providers (GSPs), but the process was far from seamless. However, Account Aggregators have transformed this landscape by making the flow of GST data consent-based and real-time. This enhances the efficiency of financial processes and provides a much-needed boost to the MSME sector. With over 63 million MSMEs in India, the credit gap of 20 to 25 lakh crore rupees has been a pressing concern. AAs are poised to play a pivotal role in addressing this gap and driving financial inclusion.

Empowering Lenders and InstitutionsOne of the most significant advantages of AAs is their ability to enable lenders and financial institutions to provide cash-flow-based financing and monitor loans effectively using recurring data fetches from GST records. This creates a win-win situation for both lenders and borrowers. For lenders, the GST data is a reliable source of information to assess a borrower’s financial health and repayment capacity. For borrowers, it streamlines the loan application process. It increases the likelihood of approval, particularly for the new-to-credit (NTC) segment, which is expected to comprise 50 million MSMEs by the end of the year.

Targeting Untapped MarketsAs the Indian economy becomes more inclusive, women’s participation in the MSME sector is rising. Additionally, tier 2 and tier 3 cities are emerging as hotbeds of business activity and credit demand. This trend is expected to drive substantial growth in the MSME ecosystem. AAs are uniquely positioned to cater to this demographic shift by optimizing funnel processes and enhancing cross-sectoral data analysis to tailor offerings that suit the unique needs of these segments.

Seamless Onboarding and BeyondOne of the primary challenges faced by lenders during customer onboarding was the need for comprehensive and real-time data. This hurdle impeded their ability to offer personalized solutions and make informed decisions. AAs come to the rescue by directly sourcing data from primary authorities, eliminating the friction caused by data gathering from disparate sources. This streamlined onboarding process facilitates lenders in offering small-ticket loans and sachet products, effectively tapping into the potential of millions of MSMEs.

Harnessing the Power of GST DataThe data encompasses GSTR-1 and GSTR-3B, offering insights into the outward supplies and self-declared income. The e-invoice data is available for the completed return period in the last 18 months, providing a substantial timeframe for analysis.

• GSTR-1 offers a glimpse into outward supplies, helping estimate past and future cash flows. This data is instrumental in underwriting invoices through automated rule engines.
• On the other hand, GSTR-3B provides a self-declared summary of GST returns, aggregating turnover figures and offering a snapshot of the taxpayer’s credit claim and payable sales.
• Return filing details serve as a valuable surrogate that offers insights beyond mere numbers. They provide a window into the taxpayer’s discipline and financial behavior, effectively acting as indicators of their loan repayment potential.

Revolutionizing Insurance and InvestmentsInsurers have long grappled with a need for more data for underwriting MSMEs. With GST data at their disposal, they can gain a deeper understanding of a business’s income level, operations, and stability, enabling them to tailor insurance offers that suit the unique needs of MSMEs. Moreover, investment advisors can leverage GST data to gain insights into customers’ profiles and preferences, offering more personalized investment advice and solutions.

In conclusion, the advent of Account Aggregators (AAs) and the seamless integration of GST data is reshaping the financial services landscape for MSMEs in India. The journey has just begun, and the future holds many possibilities for businesses, lenders, insurers, and advisors alike.

The webinar also featured a TSP Spotlight session where Setu and FinBox showcased their FIU solutions using GST data. Check out the link below to listen to the complete webinar and the Q&A session!