One of the principal benefits of digital technologies is the opportunity it offers to collate data from myriad sources into one place for effective usage. In the financial services sector, this has particularly been a game changer with the introduction of the Account Aggregator (AA) framework.
AA framework, for the layman, is the collection of financial data of a user from multiple sources under one place. This information can be collated from various accounts like loan/credit, current/savings, all kinds of investment accounts as well as government accounts and consumer or business-related accounts. Essentially, from your bank statement, DEMAT account, credit card bill to your provident fund account – you can access all your financial information at one place and share it seamlessly basis your consent. This system is enabled through an open Application Processing Interface (API).
Since its launch in September 2021, the AA ecosystem has played a phenomenal role in streamlining data transfer from Financial Information Providers (FIP) to Financial Information Users (FIU). It has served the dual purpose of empowering users to control the flow of their data while making information easily available in a hassle-free way. Nonetheless, as the ecosystem and its players grow, there remains room for further development.
This brings us to the most important question – What can we do to make AAs more user friendly?
1. Interoperability between accounts: In the last few years, there has been quite a surge in the number of AAs in the market. While FIUs have tied up with most of them, sometimes a customer may have an account with an AA that is not an associate. In this case, the customer may be required to make a second account with an AA that a FIU has tied up with – thus increasing compliances and making the process more cumbersome. Making the whole purpose of an AA redundant.
To ensure such situations do not arise, there should be a system where there is smooth interoperability between accounts. Simply put, there should be a single login that works on all platforms, i.e., AAs should be able to transfer information to each other on approval by the owner – without any bottlenecks in between.
2. Ability to auto detect data: Currently, even if an FIU has tied up with all the possible AAs in the market, there is no interface to know which AA does a particular customer have an account with. Unless, the customer mentions it themselves. This is another step the customer has to take in the registration process.
Now, instead of this, picture a system where on inserting the mobile number – an FIU could directly auto detect which AA a customer is registered with. The FIU would directly redirect the customer to the concerned AA and it would make the entire process much smoother. Fully automated without requiring any additional information from the customer. Not only would this work well for customer satisfaction but also accelerate the speed at which transactions are taking place.
3. Investment in infrastructure to improve success rates: The AA framework has been well appreciated by all major stakeholders in the financial services ecosystem. Consequently, as more and more FIPs go live on the AA system, what they fail to do is make a corresponding investment in the infrastructure required to handle the increased volume of transactions. For example, if an aggregator is required to pull out data of say 100 users – there is only a 70% success rate here since the FIP does not have the necessary technological infrastructure to support the large transaction volume.
This results in erroneous information download or some details being missed out. Further, currently AAs can only get data related to bank statements. While they are equipped to get all kinds of financial information, the roll out is alarmingly slow.
Hence, AAs cannot even get a clear picture of the absolute financial standing of a customer – which is what should happen in an ideal situation.
Though currently still in its nascent stage, the AA framework has much more benefits for the financial industry than simple data transfer from FIP to FIU. With the help of the information collected by AAs, financial advisors can gain an in-depth picture about a user’s financial status and power. This information can then be leveraged to provide personalized financial advisory and service. Thus, if the above challenges are looked into – it has the ability of transforming the entire ecosystem. AAs, supported by regulators and latest technological innovations can change from mere AAs to an important tool in credit assessment and financial planning.