If the Unified Payments Interface (UPI) changed the way we make payments, then the Account Aggregators (AA) system, which was launched on Thursday, may change the way credit is processed and accessed by millions in India, democratising credit in the country.

       Account aggregators can bolster the lending ecosystem in the country, which can make India a data-rich country and also boost the digital economy, M Rajeshwar Rao, Deputy Governor, Reserve Bank of India said.

       Speaking at the Account Aggregator Go-Live event, Rao said, the desired objective in the case of account aggregator (AA) ecosystem will be attained when a large number of customers and information providers are onboarded on the account aggregator platforms, and they are able to get aggregated data in a form and manner desired by the users in a completely safe and secure environment.

       “What is equally important is that the financial information providers (FIPs) and the financial information users (FIUs) tap into the vast potential of this innovative platform. The systems will function optimally only when a variety of customer accounts are maintained across different financial entities, cutting across financial sector regulators are linked to the account aggregator”, he added.

       Eight Indian banks including the country’s largest lender State Bank of India, largest private sector lender HDFC Bank, and others such as ICICI, Axis, Kotak Mahindra, IndusInd, Federal, and IDFC First have joined the AA ecosystem as financial information providers (FIPs). Four of the eight have gone live while the others are in the process of going live. Further, the GSTN network has given in-principal approval to become a FIP on this network.

       Also, many more banks are expected to join the AA ecosystem in the coming months to allow all customers, regardless of bank, to access their data. Currently, four AAs -- Finvu, OneMoney, CAMS Finserv, NESL -- have got operational approval to get going and these AAs have been working with various FIPs and FIUs to get the network going. Three others have received in-principle approvals from the Reserve Bank of India (RBI).

       Further, Nandan Nilekani, Chairman, RBI Committee on Deepening Digital Payments (2019) and Volunteer, iSPIRT, said, talks are on to get the telecom data on this (AA) network, which means that tomorrow somebody who has a mobile phone and has a great track record of regularly paying for prepaid telephone charges can then use that data to get a loan.

       “The AA system, while initially developed for financial services, actually, transcends that. It is an architecture that will be applied to any sector and, in fact, there is a discussion on how the AA framework can be applied to the health care sector so that people have access to their own health data to get financial services and better health care”, he added.

       An AA enables the free and instant exchange of financial data between the financial information users (FIUs) and financial information providers (FIPs) with due consent from customers. According to Sahmati, a collective AA ecosystem, an account aggregator ‘data-blind’ as the data that flows through them is encrypted and can be processed only by the FIU for whom the data is intended. Also, an AA does not and cannot store any user’s data – thus, the potential for leakage and misuse of the user’s data is prevented. So, an AA merely acts as a conduit between FIUs and FIPs and does not process the data.

       “The larger goal of the AA is to empower customers and reduce information asymmetry and is aimed at ensuring that the customer has full control over the information that is being shared through the account aggregator and for what purpose”, Rao said.

       Disruptions due to Covid19 have worsened the credit gap and this credit gap can cause delays in the credit approval process. Hence, the AAs can act as an intermediary here to provide accurate data, with the explicit consent of the borrowers. This will also help to reduce the compliance cost of the MSMEs, Rao added.

       Nilekani is of the opinion that as the country emerges from the pandemic, and as we look for an economic recovery, making sure that small businesses have access to credit is going to be very important.

       “...if a business has a digital footprint of the payments made to its vendors, purchases made by consumers, of the invoices, and the taxes they have paid then that information can be used by a lender to make a decision to give that MSME a working capital loan and therefore digital footprints used properly will ensure huge amounts of credit to small businesses and lead to the democratization of credit”, he said.

       Pankaj Jain, additional secretary, Ministry of Finance said, the government has been on the idea of loans in sachets and invoiced-based financing. “.. the intent is to make sure how does loan ticket loans to MSMEs without a high level of transaction cost,” he said.

       The account aggregator ecosystem is still in a nascent stage of development. But given the sensitivity of the platform on account of the nature of data handled by it, it becomes imperative to ensure that the growth is orderly.

       “As the system grows and matures, newer business models and customer offerings will pour in. While RBI is open and encouraging to innovation, we need to bear in mind that there is a need to maintain a balance between innovation and the spirit of account aggregator regulatory structure”, Rao said.

       “As a regulator, we have created a launchpad by coming out with the regulatory framework”, Rao said.

       “We can confidently say that there is no other country in the world, which has developed such a thorough and robust architecture at scale for a population of a billion people with 50 million businesses to take advantage of their own data so as to improve their lives”, Nilekani added.