The fast paced Indian finance
The world is moving very fast and when it comes to financial services and that too in the context of the planet’s largest democracy, the move is even more faster. More and more people are adopting the financial system of the country and in doing so, they are generating more and more financial data.
But are they really getting financially included? Let’s see.
The irony is that Indians are going to be financial data rich before they be economically rich. What this means is that
a person from the state of Bihar in India will have same digital footprint as a person living in Boston while their financial position can be very different.
This rise from a data poor nation to a data rich one has been exponential, the credit for which can almost be fully credited to building of Public Digital Infrastructure or India Stack as we have known it. From Presence-less identity (Aadhaar or UID) to Cashless transactions (UPI) to Paperless (E-sign, E-KYC and mandates), the country has seen such changes in less than a decade which was speculated to happen over 46 years. We are able to do it in one-fifth of the time!
Data — the new oil and 4th layer of India Stack
Since data is the new oil, next in this riding of wave is the consent layer that will allow individuals to know and understand their data before sharing it (or revoking) with granular control. This new paradigm shift empowers people (and businesses) with their own data providing control and visibility over how their data is stored and accessed with focus on security and in a privacy preserving manner.
The last few years has been sea-change moment for the country’s financial space. From Aadhaar, UPI and Aadhaar backed digital services to newest introduction of eRUPI, the government has been leading the innovation drive.
Today individuals and businesses (small and medium) have a lot of financial data associated with them and this amount of data is only increasing as we are performing more and more transactions and financial activity. These data can bring so many values in the form of services and other offerings to us when put to use. But the problem is that all these data are kept in siloes by the fiduciaries such as banks and other institutions generally where the data was generated. There are many reasons for this, security being one of them. You would be able to gain lot more values from these data of yours if the data was available to you (or developers) in a simple, secure and programmatic way.
If the data can be shared more freely (like in a free market but obviously with certain regulations to protect the data), an individual can have (and will have) access to more competitive services. So, the ocean of data that has been lying in siloes with banks and other fiduciaries is going to become available to developers to build new and exciting use cases — something that industry has never witnessed before. That is what an Account Aggregator(AA) framework will enable.
Account Aggregator (the Consent Managers)
The RBI approved a new class of NBFCs in 2016 to act as Account Aggregators. The main responsibilities of the account aggregator are to provide services based on the explicit consent of individual clients. This primarily includes transfer, but not storing, of a client’s data.
Also for the first time it happens to happen that a govt regulator like RBI is publishing set of standardized APIs and technical architecture for the entire ecosystem — so no excels sheets or MS-word file for sharing the APIs as it has been previously. Exciting! Isn’t it?
Get Gaurav K Pandey’s stories in your inbox
Join Medium for free to get updates from this writer.
Account Aggregator (AA) is the construct/framework that addresses the above pain points and provides a digital platform for easy sharing and consumption of data from various entities with user consent. RBI and other Financial Services Regulators (FSRs) are providing the required regulatory support and guidance for the rollout of AA.
We now would be able to streamline, aggregate, outsource, manipulate, optimize or rather analyze the data in ways which just aren’t possible today.
Currently the financial data are accessed in ways that are insecure, ineffective and costs time and money — we share our financial activities through prints/pdfs/scans and internet banking scraping. These methods has underpinning flaws and drawbacks like —
You might think that you know what you’re signing up for but actually you do not!
1. Non-Programmable data — Data lying with most of the fiduciaries are not open and thus unavailable. And even if some of them are available, they are not standardized which eventually limits the way they can be put to use.
2. Sharing too much data — We often end-up sharing more data than that is essentially required. For example, a financial services might only need to know your average monthly balance above a certain threshold and this can be queried as a simple yes or no but presently we have to share our account statement dating back to a period of minimum 6 months.
With AA framework in place, we can now have granular control over data.
3. Data Governance and Right to Forget — In present scenario, after a financial service ends or suppose if you decide midway to stop availing a credit/loan service (or any other service), do you have the right to ask the data consuming organization to delete your data as and when you say NO.
AA will let us have the right to revoke the consent that we have provided earlier and the organization will have to abide by it.
4. Security of data — We have no know-how on how our data is stored, guarded and processed by the involved institutions. Screen scraping application asks you to share your net-banking credentials.
Now you tell me what is better to exchange consent. Reading a long text with small fonts of TnCs or using a structured and programmatic data that can be presented in any way. Today we sign the terms of FIPs and FIUs often without knowing or understanding how and what data they have access to.
Is AA ready to use?
It’s very exciting time in the India Fintech Industry (and others also) to see solutions being build on this new framework where for the first time the data is not the product, the user is not the product but the data will be used to empower and enrich user’s lives.
RBI has mandated all the banks to implement these at the earliest.
RBI has currently listed over 20 different types of asset class financial data for inclusion that includes all baking account data, funds and stock data.
Currently 4 Banks — ICICI, HDFC, Axis and IndusInd have started implementing the AA framework and 4 banks including SBI are in the process of doing it. This would cover almost 80% of Indian Banking ecosystem. Few Mutual Funds are also planning to implement.
There are already 7 AA who have readied the consent manager app. You can test their sandbox and live application. Listed here.
Let me know what you think and if you want to learn more on the progress of AA framework, do check out Sahamati website and Youtube channel. Sahamati is a Collective of Account Aggregator ecosystem set up as a non-Government, private limited company. It’s task is to regulate AA ecosystem.
