Account Aggregator Network: Financial Data-sharing System

In Context

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

About

• AA framework was created through an inter-regulatory decision by RBI and other regulators.
• Based on the Data Empowerment and Protection Architecture (DEPA) framework
  • It allows users to securely access their data and share the same with third parties 

What is an Account Aggregator?

• It is a non-banking financial company engaged in the business of providing, under a contract, the service of retrieving or collecting financial information of its customers.
• Engaged in consolidating, organising and presenting such information to the customer or any other financial information user as specified by the bank.
• Data cannot be shared without the consent of the individual.
• The licence for AAs is issued by the RBI.

Working of AA

• It has a three-tier structure: Account Aggregator (AA), FIP (Financial Information Provider) and FIU (Financial Information User).
• A 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 a FIP to provide various services to the consumer. An FIU is a lending bank that wants access to the borrower’s data to determine if the borrower qualifies for a loan. 
• Banks play a dual role – as a FIP and as an FIU.

Image Courtesy: Moneycontrol

Benefits

• Hasslefree & prompt Services: Replaces hassles (physical & scanned copies), with a simple, mobile-based, and safe digital data access & sharing process.
• Cost Reduction: Allow banks to access consented data flow & create new services.
• Fraud Reduction: ↓ frauds and compliance with upcoming privacy laws.
• Less Physical interaction & Corporate Governance: No tampering of records.

Challenges

• Issue of data ethics: Do not enforce any standards on the acquisition of data by  FIU.
• Possibility of abuse and data mining: Data Privacy issue 
• Problems with the Consent Collection: Poor understanding of individuals regarding consent. 
• Technical glitches

Way Forward

• The PDP Bill, 2019 provides a lens to understand how data privacy and security can be applicable to the users of the NBFC–AA system.  
• Robust SOP should be there.

Source: IE