By Nikhil Kurhe
One of the last actions of Dr. Raghuram Rajan’s tenure as the RBI Governor in 2016 was to pull together the Master Directions for a new kind of Non-Banking Financial Company – Account Aggregator. From the first circular on 2nd of September 2016, to the official launch on 2nd of September, 2021, it has been a while. And yet I reckon, Dr. Rajan will definitely look back on this as one the key achievements of his tenure, as the AA ecosystem finally embarks on its growth journey. Let’s dive into the specifics.
An Account Aggregator is a consent manager to enable Open Finance in India. Here’s what that means: When you open a bank account, receive a salary, spend across credit cards and credit lines, buy insurance, stocks, mutual funds and save for your retirement with something like PPF, EPF, NPS, you are interacting with a lot of systems. All of these systems are offering you financial services via entities regulated by RBI, IRDAI, PFRDA and SEBI. In the pre-AA world, anytime you, the end user, needed to file your taxes or get a new loan, buy a new term plan, you were expected to query each of these silos for your digital footprint. We’ve all been through the cumbersome experience of navigating clunky web UIs, setting a date range, downloading a PDF, making sure everything is in order and then uploading these documents following a checklist. At best you’ve wasted time that could’ve been spent elsewhere, worst case, you waited in a line to update your passbook, printing out statements, and self-attesting a bunch of them. Not how you imagined your day off right? A few fintechs have been a bit clever with offering solutions like we’ll take away this pain if you give us access to your gmail, but that is a slippery slope.
The solution to these challenges is the Account Aggregator initiative. End consumers can now link accounts, starting with banking, with a Virtual User Address (VUA) hosted by the Account Aggregators. This was a hard step. Creating a handle and the barrage of OTPs that follow to link your accounts is a one time herculean effort. Now the rewards: You own your data, and you can control how it will be used. Now, regulated entities who want to access your data, can do so programmatically and with your explicit permission. Account Aggregators help you keep track of your consents, allowing you to link more accounts like say your Max Life Insurance Policy as more regulated entities join the ecosystem as Information Providers and Users.
Now why it took more than five years to get here is a different story, but let’s focus on where we are. A little over 6.5 months post the public launch, we’re just hitting the 2.5L accounts linked and consents given. This has been driven by 9 FIPs who live with banking data and over 100 FIUs who have built their customer journeys and products on the data rails that the AA ecosystem provides. We also have 4 Account Aggregators and over 50 TSPs working hard to expand the ecosystem to get multiple asset classes operational. The numbers paint a pretty picture with week-on-week growth of 12%. At this rate, we will end up with a little over 7Cr consents by next April. Pretty neat, but I reckon this pace will ramp up even further as behemoths like SBI enter the ecosystem.
If you’ve made it this far though, you’re not here for history, but the future. India is in uncharted territory with respect to Open Finance. Most global open banking approaches focus on payments as a wedge with data often being a secondary offering, with the surface barely being scratched. However, India having already entities like NPCI enabling UPI and IMPS, AAs put the spotlight on data. The world will witness how Open Finance can play out when done right and yet again, allow us to leapfrog and demonstrate our digital prowess.
Here are some specific updates you can expect in the near future: more banks including (and not limited to) PSBs like SBI, PNB, BoB will be going live on the Account Aggregator. GST data along with insurance products ranging from Term Plans to ULIPs will all be available as Asset classes you can link and share.
Already some really innovative use cases are being built out around highly specific pain points. Next time you’re in your bank branch and your RM is trying to sell you insurance, they’ll know (with your consent) what products you already have to then recommend the right product instead of blindly selling a policy that is the flavor of the month. I estimate that we’ll end this financial year with at least 20 Information Providers while adding another 100 Information Users. Anyone who joins now will see a protocol evolve and grow in almost real time. Feel free to use your favorite Financial Information User and experience the future.
(The author is CEO & Co-Founder Finarkein Analytics. Views are personal)