Until a few years ago, financial data was kept in the closed systems of various banks and financial institutions. A closed system like this creates a data advantage for the banks (that can use this to give loans) but significantly hinders financial innovation. This realization led the world to the notion of Open Banking - a system that allows fluid access of financial data to trusted entities using Application Programming Interfaces (APIs). The Account Aggregator (AA) system is India’s version of Open Banking coupled with various innovations to ensure user data privacy and to keep the locus of control in the hands of end users.
Account Aggregator is a framework introduced by the Reserve Bank of India (RBI) to facilitate the seamless sharing of financial information among various participants of the account aggregator network. The consent-based system allows users to securely and digitally share their financial data across multiple accounts and institutions. The system operates on the principle of providing individuals complete control over their data and enabling them to leverage it for various financial purposes. The consent for any financial information shared is parameterized by variables like:
Any registered entity regulated by one or more of the following four financial regulators can apply to become part of the AA network:
After obtaining an appropriate license from one or more of the above regulators, the entity needs to:
The Account Aggregator ecosystem is developed and run by Sahamati, a self-organized non-profit organization. Sahamati is an alliance of various people and organizations from different backgrounds like finance, law, and technology on a mission to develop and promote the account aggregator system in India. Sahamati also maintains the AA central registry. All participants in the AA ecosystem must be listed in the central registry along with some public information like IP addresses and public keys before they can start accessing the AA network. Sahamati has created various technical utilities and certificates for the account aggregator system and continues to promote the development in an Open Source manner.
The account aggregator flow starts with a FIU requesting financial information from FIPs. The first step of the process involves authenticating the end user with the AA using their phone number and OTP. Then the user selects their financial accounts which starts the account discovery process followed by account linking process. A consent screen is displayed to the user that mentions all the consent parameters and user has the option to accept or reject the consent. Upon successful acceptance of the consent, the FIU receives a secret token (called the consent handle) that is used to fetch financial information in accordance with constraints of the consent.
The account aggregator system is designed with utmost considerations to security and privacy. The end user holds complete control over their financial data with the help of consent. The end user can decide precisely what data, for what accounts, for what time range, and for how long can be visible to a financial information user. Since the data is fully-encrypted in transit, account aggregators can’t see any user data. Account Aggregators are mere consent managers that move data from one institution to another based on the consent without the ability to look at that data.
The account aggregator system is on track to completely revolutionize how financial services operate in India. Financial data will flow smoothly between the entities that need access to it and end users will have complete control over that level of access. Access to credit, financial advice, investment advice, and retirement planning will become available at the touch of a button. Instead of getting loans after weeks of paperwork and drudgery, loans will be underwritten in seconds and disbursed in minutes. And the stage for a new era of India will be set!
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