Account Aggregators (AA) Network


    In News

    • Recently, eight of India’s major banks joined the Account Aggregator (AA) network.


    • The eight major banks are: State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank and 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.
    • It will enable customers to easily access and share their financial data. 

    (Image Courtesy: yourstory)


    Account Aggregator

    • Definition: 
      • 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 also engaged in consolidating, organising and presenting such information to the customer or any other financial information user as may be specified by the bank.
    • Created by: 
      • The AA framework was created through an inter-regulatory decision by RBI and other regulators including Securities and Exchange Board of India, Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority (PFRDA) through an initiative of the Financial Stability and Development Council (FSDC). 
    • Working: 
      • An Account Aggregator is a financial utility for secure flow of data controlled by the individual.
      • The AA framework was created through an inter-regulatory decision and initiative of the Financial Stability and Development Council (FSDC). 
      • It has a three-tier structure: 
        • Account Aggregator, 
        • FIP (Financial Information Provider) and 
        • FIU (Financial Information User).
      • Banks play a dual role – as an FIP and as an FIU.
    • Licence: The licence for AAs is issued by the RBI, and the financial sector will have many AAs.
    • Data Sharing:
      • An Account Aggregator allows a customer to transfer his financial information pertaining to various accounts such as bank deposits, equity, mutual fund and pension funds to any entity requiring access to such information. 
      • There are 19 categories of information that fall under ‘financial information’, besides various other categories relating to banking and investments.
      • For sharing of such information, the FIU is required to initiate a request for consent by way of any platform/app run by the AA. 
      • Such a request is received by the individual customer through the AA, and the information is shared by the AA, after consent is obtained.
    • Data Protection:
      • Data transmitted through the AA is encrypted.  AAs are not allowed to store, process and sell the customer’s data. 
      • No financial information accessed by the AA from an FIP should reside with the AA. 
      • It should not use the services of a third-party service provider for undertaking the business of account aggregation. 
      • User authentication credentials of customers relating to accounts with various FIPs shall not be accessed by the AA
    • Customer Grievance
      • An account aggregator shall have in place a Board approved policy for handling/ disposal of customer grievances/ complaints. It shall have a dedicated set-up to address customer grievances/ complaints.
      • Customer complaints shall be handled/ disposed of by the Account Aggregator within such time and in such manner as provided for in its Board approved policy, but in any case not beyond a period of one month from its receipt.
    • AA Apps: 
      • Four account aggregator apps that have received operational licences from RBI: Finvu, OneMoney, CAMS Finserv, and NESL, 
      • In-principle nods have been given to: PhonePe, Perfios, and Yodlee.


    • Seamless Transactions: It reduces the need for individuals to wait in long bank queues, use Internet banking portals, share their passwords, or seek out physical notarisation to access and share their financial documents. 
    • Secured Data: An AA creates secure, digital access to personal data at a time when Covid-19 has led to restrictions on physical interaction. An AA ensures appropriate mechanisms for proper customer identification. 
    • Reduced Frauds: It reduces the fraud associated with physical data by introducing secure digital signatures and end-to-end encryption for data sharing.
    • User Privacy: An AA should share information only with the customer to whom it relates or any other financial information user as authorised by the customer.
    • Easy Loans: This will help banks reduce transaction costs, which will enable them to offer lower ticket size loans and more tailored products and services to our customers. 
      • For instance, whereas physical collateral is usually required for an MSME loan, with secure data sharing via AA, ‘information collateral’ (or data on future MSME income) can be used to access a small formal loan. 


    • Account Aggregators are an exciting addition to India’s digital infrastructure as it will allow banks to access consented data flows and verified data. 
    • AAs enable secure, consented data flows while protecting user privacy. 
    • In conjunction with other platforms like the UPI, Account Aggregator creates in India the most cutting edge digital financial infrastructure in the world.


    Duties and Responsibilities of an Account Aggregator

    • Account Aggregator shall ensure that the providing of services to a customer who has made a specific application for availing such services, would be backed by appropriate agreements/ authorisations between the Account Aggregator, the customer and the Financial Service providers.
    • Account Aggregator shall not support transactions in financial assets by customers.
    • Account Aggregator shall ensure appropriate mechanisms for proper customer identification.
    • Account Aggregator shall share information with the customer to whom it relates or any other person authorized by the customer. The process of authentication of the authorization has to be robust.
    • Account Aggregator shall not undertake any other business other than the business of account aggregator. Deployment of investible surplus by an Account Aggregator in instruments, not for trading, shall however be permitted.
    • No financial asset related customer information pulled out by the Account Aggregator from the financial service providers should reside with the Account Aggregator.
    • Account Aggregator shall have a Citizen Charter that explicitly guarantees protection of the rights of a customer. The Account Aggregator shall not part with any information that it may come to acquire from/ on behalf of a customer.

    FIP (Financial Information Provider)

    • An FIP is the data fiduciary, which holds customers’ data. 
    • It can be a bank, NBFC, mutual fund, insurance repository or pension fund repository. 
    • An FIU consumes the data from an FIP to provide various services to the consumer.

    FIU (Financial Information User):

    • An FIU is a lending bank that wants access to the borrower’s data to determine if the borrower qualifies for a loan. 


    Source: IE