Decoding Account Aggregator Framework

“Lending firms using the Account Aggregator (AA) framework facilitated loans worth INR 42,300 crore during the period of September 2021 to March 2024.”
– Sahamati

What is Account Aggregation?

Account aggregation or financial data aggregation is a technique used in the financial services industry involving the collection, gathering, and synthesis of information in one place from multiple financial accounts, such as loan accounts, savings and current accounts, credit cards, investment accounts like mutual funds and demat accounts, public provident fund, income tax returns, as well as supplementary business or consumer accounts in e-commerce, food or cab aggregators. The data collection, assembling, and sharing are enabled via open application programming interface (API) connections.

The inception of the Account Aggregator framework in India dates back to 2016 when the Reserve Bank of India held joint consultations at the Financial Stability and Development Council (FSDC) with representation from RBI, SEBI, IRDAI, and PFRDA and released the Master Guidelines for the framework. That’s how a new class of NBFCs known as Account Aggregators (AA) was conceptualized. In 2021, the AA ecosystem saw the light of day with eight large private sector banks joining it.

Who are the stakeholder entities?

• Financial Information Providers (FIPs): FIPs are regulated financial entities such as banks, NBFCs, insurance, and asset management companies, depositories, etc., who store citizens’ data by the virtue of holding their accounts and share the data with citizens’ consent. For example, when you secure a loan, your bank can act as the FIP by sharing your data with the lending bank or NBFC. As of August 2024, the number of FIPs stands at 163.
• Financial Information Users (FIUs): FIUs are regulated financial entities like banks, NBFCs, and others who use citizens’ available data with FIPs to provide them services. They solicit consent from a user by providing details of the data to be captured through an AA identifier.
  Since the launch of the AA framework in 2021, SEBI-regulated entities have been the early adopters. In FY24, the number of SEBI-registered FIUs recorded an exponential rise while the usage from SEBI FIUs saw growth as reflected in the number of consents taken.
• Account Aggregators (AAs): AAs are NBFCs licensed by RBI to enable the sharing of structured financial data from FIPs to FIUs while retaining a record of the consent provided. In other words, they operate as consent managers for citizens. As of now, there are 15 licensed AAs in India.

How Does the AA Framework Operate?

The AA framework empowers citizens to share data only with their explicit electronic consent, in real time, directly from FIPs to FIUs. Data cannot be shared or misused without consent. AAs cannot view, process, or store the data—they act only as secure pipes for data transfer and consent management.

• All data flow is encrypted, traceable, and governed by consent artifacts.
• Consent is specific, revocable, and limited in scope and duration.

The process works as follows:

1. The customer registers with an AA and links their financial accounts held with various FIPs.
2. When a FIU (e.g., a lender) needs access to data, the customer receives a consent request and approves or rejects it electronically.
3. If approved, the data is fetched by the AA from FIPs and shared directly (in real time) with the requesting FIU.

What are the benefits?

• AAs help financial institutions access tamper-proof and machine-readable data. It enables reliable, convenient, and secure data-sharing driving down the transaction costs for the lenders.
• AAs can improve the quantum and the quality of the loan portfolio of the lenders through efficiency gains
• AAs are poised to serve ‘thin file’ customers, expanding the total addressable market for lenders and strengthening financial inclusion. It can help financial institutions serve underserved customers and MSMEs better

What’s Next for Account Aggregators?

Currently, a customer needs to sign up with multiple Account Aggregators to complete transactions. This increases operational efforts for institutions as they need to access customer data from various sources by integrating with each data provider. To significantly reduce this operational burden, AAs plans to introduce interoperability, eliminating the need for individuals to open accounts with multiple aggregators, which in turn, will allow banks, NBFCs, and other financial institutions to exchange customer data seamlessly.

Sahamati, an industry body within the Account Aggregator ecosystem, is running a pilot program to test interoperability. If interoperability kicks in, customers’ financial data can be accessed across different financial institutions even if those institutions are linked to different aggregators, once a customer has given consent through any AA.