The fintech space is gearing up for a revolution that will revamp the way you store financial data.
“Software innovation, like almost every other kind of innovation, requires the ability to collaborate and share ideas with other people, and to sit down and talk with customers and get their feedback and understand their needs.” -Bill Gates
The contention here is to set up Account Aggregators { AAs} which are a special type of Non-Banking Financial Company (NBFC) regulated by Reserve Bank of India.
The premise here is simple : to bring together the financial entities like banks, insurance companies or any other institution that has your financial record through an agreement where they agree to share your data with each other or any other Financial Information User [FIUs] upon your consent. The financial information users here could be investment consultants or private lenders who can assess your data to chalk out a sound investment strategy or examine your financial stability to lend you respectively. The accounting aggregators will not be able to store, make changes or view any of your data but will only act as an intermediary between the entities that are acting as source and user of your financial information. Accounting Aggregates are a secure, regulated and convenient channel for sharing your financial information with others.
The reason they’re such a big revolution is because earlier it was very complex to access and share your financial data with others as the data was locked up safely with separate entities for e.g. Banks have access to your savings account information while the insurance companies have access to data related to your financial payments. There was no definite way to bring your data together. Also, if you wished to share your bank details with a lender you’d be required to get your pass book printed or share PDFs or OCRs with the fear of tampering always looming over. Hence, AAs solve a very crucial problem in thus sense.
The fact that the AAs framework has backing of major institutions like Ministry of Finance and RBI is what makes it something to watch out for. So far there is information regarding 7 entities who have been given approval to set-up AAs. These are: Finvu [a startup], Onemoney [a startup] , CAMS, NESL, MyUniverse, Reliance Jio, Yodlee. The business model is to charge money from financial information users for providing them data. Thus, the AAs must aim to capture more and more FIUs.
Some of the drawbacks related to this model are: confusion around the privacy of the data once it has reached FIU, concerns that having RBI as the main regulator may be problematic, will the public and private sectors organisations actually adopt this etc.
For now, we can only wait and watch how the things unfold and what new avenues these AAs open up.
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