Account Aggregator Framework: Explained

Here is a look at how the framework functions and what the benefits are

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To provide easy access to financial data to different parties in the financial ecosystem, the Reserve Bank of India launched a data-sharing system called the Account Aggregator framework in September this year. 


The government believes that this framework will revolutionize the finance sector and will benefit everyone from individuals to small businesses. 

In this article, we take a look at how the framework functions and what the benefits are. 

What is Account Aggregator Framework?

Account Aggregators (AA) are data intermediaries which will collect and share the user’s financial information from Financial Information Providers (FIPs) to Financial Information Users (FIUs) after seeking the consent of the consumer.

FIPs are entities that have consumer data and FIUs are those asking for consumer data. S o, how it works? First, FIU will request AAs for certain information, which in turn will ask users for their consent to share financial information with the FIU. 

This interaction process of AAs with users should be done using either a web-based or a mobile app-based client. Once consent is received, the AA will request the FIP to share the information, which will be encrypted. The information will be shared with AA who will in turn transfer it to the FIU. Users need to link their FIPs in the AA app using which a user can share the data with an FIU. 

Overall, there are three constituents involved, AA, FIU and FIP. Basically, the AA, which was launched through an inter-regulatory decision by the RBI, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA) through Financial Stability and Development Council (FSDC), is a new class of NBFC approved by the RBI to manage consent for sharing financial data of users. 

The FIUs are basically banks, lending agencies, and NBFCs and FIPs are institutions that oversee user data, that is banks, mutual funds, pension funds, and some NBFCs.

As of now, only bank accounts can be linked, but sooner GST data, mutual fund data, among others may also be included.

Some of the banks that have joined the AA network are Axis, ICICI, HDFC, IndusInd Bank, State Bank of India, Kotak Mahindra Bank, IDFC First Bank, and Federal Bank.

Benefits Of Account Aggregator Framework

The framework makes it possible to share financial data in a secure way. It also reduces transaction costs. Additionally, it solves one of the biggest challenges faced by India's financial sector, which is excessive paperwork. For instance, in case one is looking to take an insurance policy or a loan or make some investment, he or she can give permission to AA to share data with banks and organizations. 

Further, one can be sure about data security. This is because  AAs only share the data and do not use them. Unlike tech companies that are blamed for compiling and selling data, AAs will not be aggregating the data. The sender encrypts the data and only the recipient can decrypt it, so AAs are truly intermediaries. Additionally, the data will only be shared with the user's consent. 

AA not only makes credit risk assessment easier for FIUs, but also offers a complete dashboard for small businesses. It makes financial management simpler. Businesses can keep all data in one place and share it in real-time with various financial service providers such as lenders and wealth services providers. 

S Shanthi

Written By

Entrepreneur Staff

Shanthi specializes in writing sector-specific trends, interviews and startup profiles. She has worked as a feature writer for over a decade in several print and digital media companies. She is also a mom who looks forward to playing a game of cards with her tween daughter every evening after work.