Applying for a loan? Opening a new bank account? Buying insurance or investing in a mutual fund? Chances are that most of these financial transactions will still involve a fair amount of paperwork. Documents to be provided, forms to be signed etc. etc….
Account aggregators, registered as non-banking finance companies, will enable financial data sharing from “Financial Information Providers” with “Financial Information Users”, with due customer consent.
Six such entities have been given approval by the Reserve Bank of India. These include NSEL Asset Data Ltd., CAMS Finserve Financial Services Ltd., Cookiejar Technologies Pvt., Finsec AA Solutions Pvt., Yodlee Finsoft Pvt. and Jio Information Solutions Ltd.
This week, the ecosystem went live, with eight banks set to be part of it.
It is important to understand what account aggregators do.
Let’s say you are seeking a loan from a bank. Once you submit your request, the bank will seek your financial information, including bank account data, salary information, any previous loans and repayment history.
The account aggregator, which you have signed up with, will allow you to access all of your financial data through one application.
After you have selected the data you want to share, the account aggregator will seek your consent for sharing it with the bank which is providing the loan or any other financial service provider.
Financial information providers can range from banks, mutual funds, insurance companies and tax authorities like the GST platform. The users of information can vary from banks to wealth advisories and investment firms.
For consumers, the account aggregators can help make a number of financial transactions paperless and reduce the turnaround time.
A simple authorisation to the account aggregator to share information from, say, your bank accounts with an asset management company, can help complete a transaction such as a mutual fund investment. Similarly, you may be able to process a loan within minutes if you authorise your account aggregator to share information, such as your bank account statements, with the entity you are seeking a loan from.
Customers also have the power to choose the extent to which their data can be shared. If a customer has five bank accounts, they can choose to give access to data from only three. They can also choose the period of data that needs to be shared with the service provider.
The Financial Information User can assess the data and proceed to approve or deny the service a customer seeks. The use of account aggregators will mean shorter turnaround times for financial service providers. More importantly, it will reduce the risk of false documents and information being provided to them.