Account Aggregator (AA): Eight major banks have recently joined the Account Aggregator (AA) network that will enable customers to easily access and share their financial data.
These major banks are:
- State Bank of India
- ICICI Bank
- Axis Bank
- IDFC First Bank
- Kotak Mahindra Bank
- HDFC Bank
- IndusInd Bank
- Federal Bank
The framework, which has been under discussion since 2016 and in the testing phase for some time, will now be open to all customers.
About Account Aggregator (AA):
- According to the Reserve Bank of India (RBI), an 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 customer.
- It is a framework that simply facilitates sharing of financial information in a real-time and data-blind manner (Data flow through AA are encrypted) between regulated entities (Banks and NBFCs).
- The AA framework was created through an inter-regulatory decision by RBI and other regulators including the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority, and the Pension Fund Regulatory and Development Authority (PFRDA) through an initiative of the Financial Stability and Development Council (FSDC).
- Its primary responsibility is to facilitate the transfer of user’s financial data with their explicit consent.
- It is also engaged in consolidating, organizing and presenting such information to the customer or any other financial information user as may be specified by the bank.
- AAs enable the flow of data between Financial Information Providers (FIPs) and Financial Information Users (FIUs).
- The architecture of AA is based on the Data Empowerment and Protection Architecture (DEPA) framework.
Note: DEPA is an architecture that lets users securely access their data and share the same with third parties.
- The license for AAs is issued by the RBI, and the financial sector will have many AAs.
- It reduces the need for individuals to wait in long bank queues, use Internet banking portals, share their passwords, or seek out physical notarization to access and share their financial documents.
- An Account Aggregator is a financial utility for the secure flow of data controlled by the individual.
- It will allow banks to access consented data flows and verified data.
- This will help banks reduce transaction costs, which will enable us to offer lower ticket size loans and more tailored products and services to our customers.
- It will also help in reducing fraud and comply with upcoming privacy laws