Account Aggregators will give individuals and small businesses control over their financial data
25/07/2019: Mumbai: A unique infrastructure to help individuals and small businesses take control of their digital data was introduced in Mumbai today. The Account Aggregator (AA) model helps individuals & small businesses share their digital financial data with third parties in a safe and secure manner, and gives them greater control over how their data is being used. The financial sector will be the first area where this will be deployed, while the approach can be later applied to telecom, healthcare, and other sectors.
The workaround AAs began around four years ago when the four major financial regulators — Reserve Bank of India (RBI), Securities and Exchanges Board of India (SEBI), Insurance Regulatory and Development Agency (IRDA) and Provident Fund Regulatory and Development Agency (PFRDA) came together to allow regulated entities under their control to share data with user consent.
This is expected to revolutionise lending, wealth management, financial planning and other areas in the next few years, as individuals start to control the flow of their data held currently in silos across various financial institutions.
For example, a user seeking a loan will be able to quickly share their bank statements and other details required by lending institutions digitally through their choice of preferred AA. Users seeking financial planning services will be able to share their mutual fund, insurance, provident fund and banking details digitally through their AA app.
Their AA of choice can seamlessly obtain data from multiple service providers (called Financial Information Providers (FIPs) in the AA system) and deliver this via consent-based channels to Financial Information Users (FIUs).
This obviates the need for individuals to physically visit multiple branches for their data, share their confidential login ID details, or log-in to multiple sites themselves to download and collate the information before sharing it with lenders, financial planners and other service providers.
Data flows between FIPs and FIUs will be fully encrypted — even the AA will not be able to see the data it helps to move — thus ensuring secure sharing of data. The AA will also enable users to revoke consent to share data, and also enable individuals to share individual items of data without sharing a full history. This is almost impossible to do when full bank statements, mutual fund statements etc are shared in paper form or downloaded and sent to service providers.
The AA model gives users a level of control and oversight that they never had before with their personal financial data: it gives users a control panel through which they can share data, revoke access to data, and review and audit the data they have shared over a period of time. Providing a pathway to obtain consent also adds regulatory pressure on financial institutions not to misuse or share your personal data without explicit permission.
Moreover, FIUs also benefit from the AA system by accessing data from consented flows that are authenticated and digitally signed by the FIPs: the process reduces the incidence of fraud and increases the speed with which customers can be served. For example, a lending institution that uses the AA model will be able to run their algorithms on customer data and get back to them in real-time with loan offers. Further, once other sectoral regulators come on board, this model can be easily extended to those sectors as well. For instance, TRAI has already recommended this for telecom data, and players such as NITI Aayog have recommended its use for healthcare data.
In the backdrop of debates worldwide around data protection and privacy, the Account Aggregator system offers an easy means for individuals to share and control their data without compromising on security. Many international companies are working on privacy-enhancing technologies, but India has scored a global first by designing an interoperable and secure institutional and technology framework for data sharing, bringing four major sectoral regulators together to support the AA system in the financial sector.
Over the next few years, as more and more sectoral regulators enable user-controlled data sharing and AAs continue to innovate on modes of gathering consent, they will become a critical tool to empower individuals and small businesses with their own data.
AA has also attracted attention from global think-tanks, multilateral agencies and technologists for the simplicity of its design, the control it gives users over their data, and the ability of its technology architecture to scale to a billion citizens.
In order to support the ecosystem to operationalise the DEPA framework, a new collective for Account Aggregators will be created as a Section 8 non-profit. This pilot organisation, Sahamati, will work to accelerate the adoption of DEPA by building awareness amongst potential AAs, FIPs, and FIUs on the new technology and institutional architecture, as well as supporting implementation and integration through various workshops and published material.
Sahamati will also design shared procedural guidelines for AAs based on best practices as well as discuss common concerns for the industry in the preparation of a full public launch of DEPA towards the end of 2019.
Seven AAs have received in-principle approval from RBI to move ahead: NESL Asset Data Limited, CAMS Finserv Financial Services, Cookiejar Technologies Pvt Ltd. (Product titled Finvu), FinSec AA Solutions Private Limited (Product titled OneMoney), Aditya Birla Trustee Company Pvt Ltd, Yodlee Finsoft Pvt Limited, and Jio Information Solutions Limited.
Quotes from industry leaders (in alphabetical order by first name)
Amitabh Chaudhry, CEO, Axis Bank said, “Axis Bank was a pioneer in promoting frictionless payments through UPI. Today, UPI is transforming the payment space and is a key pillar of India’s digital landscape. The account aggregator ecosystem holds a similar potential to reduce friction in data sharing thus creating new possibilities for financial services companies. We, at Axis Bank, are pleased to be one of the early movers in this space.”
Arundhati Bhattacharya, former Chairman and Managing Director of SBI said, “The AA is a huge step forward because it places the user in the center of the data ecosystem and gives her meaningful control over her data. With this, India will become a world leader in enabling consented data flows. I would urge financial service providers to embrace the AA model at the earliest because it will enable them to become extremely efficient in processing large data sets, provide better customer service and enable financial inclusion by lowering transaction costs and reducing the possibility of fraud. Like UPI, the AA system can be another huge innovation to emerge out of India.
Nandan Nilekani, former Chairman, UIDAI, said, “India is unique in the world, because Indians are becoming data-rich before they are economically well-off. If Indians can leverage their digital footprints to get better loans and other financial products, we will have taken a step towards true data empowerment. The Account Aggregator framework is a critical digital public infrastructure that enables this. Globally, most countries are thinking of Data Protection, there are very few countries that have built a data empowerment architecture. Thanks to AA and the other digital infrastructure that we have built, India will become a leader in empowering individuals and small businesses with their own data.
Rajnish Kumar, Chairman and Managing Director, SBI said that, “SBI has always played the role of a financial fiduciary for Indians. Once the Draft Privacy Bill is approved by the parliament, we will also become a data fiduciary. The Account Aggregator system helps us by giving us access to data flows that are consented to by the user, in line with the norms in the Draft Privacy Bill. We welcome the AA model: it makes it easier for individuals to share their data with us, and shifts dependence from potentially falsified paper documents to verified data in a digital format. This is expected to bring down the cost of doing business, and helps us offer banking services more efficiently and at lower cost for customers. We will also be able to take lending and other services to a wider set of customers, thus enabling greater financial inclusion .”
Sandeep Bakhshi, MD & CEO, ICICI Bank said, “ICICI Bank has always partnered and has been at the forefront, shaping and fuelling unique opportunities in India. New opportunities are yet again emerging basis digital public infrastructure. Account Aggregator is another positive initiative,which builds on top of a sound foundation to make banking and credit more accessible to millions of Indians in a paperless manner.”
Shivashish Chatterjee, Co-founder and Managing Director, DMI Finance, said, “The creation of the NBCF-AA is a milestone not just for India but for the entire world. It is the first concerted effort to take the power of personal data and explicitly create a mechanism to put it in the hands of the individual. While many countries have moved in the direction of limiting the unauthorized use of personal data, most notably those in the Euro area through the GDPR, India is the first to create a structure that proactively empowers the individual to use her personal data to get better access to services. Over time this consent-based, seamless access to financial data will lead to meaningful productivity gains for the Indian economy with lower cost of credit and faster delivery of all credit products.”
Siddharth Shetty, Fellow, iSPIRT: While other countries focus solely on data protection, India’s diversity and scale requires us to take a holistic approach of data empowerment in addition to data protection. The Data Empowerment and Protection Architecture (DEPA) of
India Stack combines a legal & regulatory framework with appropriate institutional arrangements, and built on technological underpinnings — thus providing for an evolvable approach in dealing with the increasingly complex challenges and opportunities presented by data. This will enable us to work towards India’s unique combination of objectives: a vibrant data democracy, individual empowerment and control, and economic growth based on legitimate and high value use cases for secure data sharing.”
V Vaidyanathan, MD & CEO, IDFC First Bank said, “Over the years, several policy steps such as the liberalisation of the economy, privatisation of banking, setting up of credit bureaus, etc. have made banking more widely available. I see the Account Aggregator as part of a series of policy initiatives that make financial services and credit accessible to end consumers. Data Driven Finance is clearly the future, and AA provides an enabling framework that democratises access to loans, wealth management, mutual funds and other financial services. With AA and all the other public infrastructure that India is building, we will soon have one of the most modern financial systems in the world. IDFC First Bank is proud to be one of the early adopters of the Account Aggregator system.”
For further information reach out to BG Mahesh: firstname.lastname@example.org
- Media Coverage for July 25 AA Closed User Group Event
- Nandan Nilekani introducing the Account Aggregator at CUG on July 25, 2019
- Video: Mr Ajay Prakash Sawhney, Secretary, MeitY addressing the gathering at CUG on July 25, 2019
- Video: Ms Madhabi Puri Buch, Whole Time Member, SEBI addressing the gathering at CUG on July 25, 2019
- Video: Mr Prakash Kumar, CEO GSTN addressing the gathering at CUG on July 25, 2019
- Video: Fireside Chat with Early Adopters Moderator: Ms. Arundhati Bhattacharya, Former Chairperson SBI, Mr. Rajnish Kumar, Chairman SBI, Mr. Amitabh Chaudhary, MD & CEO Axis Bank, Mr. Anup Bagchi, Executive Director, ICICI Board of Directors, Mr. B. Madhivanan, COO, IDFC First
- Sahamati Hackathon 2020 Press Release