Shalini Gupta is the Head of Strategy at Sahamati, a member-driven industry alliance formed to facilitate adoption of the account aggregator ecosystem in India. Sahamati is committed to enabling data empowerment in India by helping power the Account Aggregator ecosystem in India. Shalini Gupta is a founding member and COO of Sahamati. She has expertise in digital marketing, forex, account aggregator, digital lending, mobile and internet banking, and audit and compliance. Gupta has conducted deep-dive sprint and awareness sessions as part of Bharat Inclusion Sprint on Account. She has also appeared on the podcast “Decoding Impact” to talk about account aggregators and how they can enable financial digital inclusion.
Account aggregators in India are revolutionising the financial industry by empowering customers to digitally access and share their financial data, expanding access to credit and promoting financial inclusion.
Financial Inclusion and Accessibility
🔄 There is a growing trend of companies experimenting with smaller ticket size loans, aiming to bring the ticket size down from the current 5 to 6 lakh to one lakh in the next year or so, showcasing the potential for increased accessibility and inclusivity in lending.
💰 The government’s push for financial inclusion and the launch of a cash flow based lending app highlights the importance of data sharing and account aggregators in easing credit access for MSMEs.
📊 The use of Telecom and utility bills as additional signals for assessing a customer’s reliability and creditworthiness is an innovative approach that can potentially expand access to credit for individuals with limited credit history.
📊 The use of alternate data sources such as telecom and utility bills, as well as post office deposits, can be a powerful tool in building up the credit history of the 300–350 million customers who have limited transactions in their bank accounts.
🌐 The growth of India’s credit share is crucial for enabling economic growth, and providing more credit is seen as an essential aspect of India’s development.
💡 The account aggregator framework makes it easier for low-income MSM customers to approach banks for loans, as it eliminates the tedious process of collecting and submitting various documents.
💼 Low-income customers without physical collateral can still access loans by providing their bank statements or showing regular DBT benefits or cash salary.
💰 Moving from group lending to individual lending poses challenges in assessing creditworthiness, as individual lending is less secure and requires additional signals such as bank statements to determine income flows and outflows.
Transformation of Financial Services
📚 The government took steps to activate GST on the account aggregator framework, amending the GST Act and gaining approval from RBI, highlighting the importance and potential benefits of this framework.
💡 The shift from apprehension to acceptance of account aggregators by public sector banks indicates that they have realized the value and potential of this technology.
💰 The use of account aggregators can potentially double the profitability of public sector banks in the next five years by providing them with valuable financial information and reducing costs.
🔄 The journey of implementing account aggregators may have been challenging, but once it takes off, progress can happen rapidly, resembling a hockey stick growth curve.
🔄 The current process of providing financial advice to individuals from diverse backgrounds is fragmented and time-consuming, but account aggregators have the potential to simplify and enhance this process by providing a complete summary of their financial accounts and demographics.
💡 The account aggregator framework can bring a shift in the financial industry by automating initial analytics models and allowing advisors to provide personalized investment advice, making it efficient and quick for consumers.
Benefits and Potential of Account Aggregators
🌐 The account aggregator framework aims to shift the lending economy from a collateral-driven model to a data collateral-driven model, making lending more efficient, reducing risk, and lowering costs for lenders.
💰 The account aggregator framework aims to capture any data trail pertaining to a customer’s financial assets, including investment details, taxation information, and GST invoices, to provide valuable signals for lenders and unlock credit for unbanked individuals.
🏦 Personal Finance Management (PFM) is a powerful use case for account aggregators, as it allows for a complete 360-degree view of a customer’s finances, enabling advisors and insurance companies to offer tailored products and services based on individual requirements.
00:00 🔍 Account aggregators in India empower customers to digitally access and share their financial data, revolutionizing investing and credit by expanding access and control over financial data for lenders and fintech companies, with the system currently having 1.13 billion activated accounts, facilitating successful consents and linking of accounts, and dispersing loans primarily for MSME and retail sectors.
1.1 Account aggregators in India are a network that empowers customers to digitally access and share their financial data, revolutionizing investing and credit by expanding access and control over financial data for lenders and fintech companies, ultimately fixing the last broken leg of the lending journey.
1.2 The account aggregator framework aims to capture financial information, including investment details and taxation data, to unlock credit for unbanked individuals, with plans to activate more financial information types and involve institutions such as cbdt, digil locker, and epfo.
1.3 Banks, insurance companies, and financial advisory firms are using account aggregator frameworks to offer personalized services and products based on a complete view of customers' financial accounts, with lending being the most common use case followed by personal finance management and insurance.
1.4 The account aggregator system currently has 1.13 billion accounts activated by banks, with 92 financial information providers and 250 financial information users, and has facilitated around 2 crore successful consents and 1.8 crore customers linking their accounts, with an estimated 7,000 crore loans dispersed, primarily consisting of MSME and retail loans, and there is potential for smaller ticket size loans in the future, with the user experience involving a B2B onboarding process where customers are directed to an account aggregator domain by
1.5 Customers can link their accounts and give consent to share their data through account aggregator apps, which provide explicit consent parameters and allow for easy data sharing with banks for lending processes.
1.6 Account aggregators have successfully convinced financial institutions to share customer data, despite initial skepticism and concerns about data privacy.
19:44 📊 Public sector banks have joined the account aggregator framework, leading to positive feedback and government support, indicating a shift towards embracing the value of data sharing for financial inclusion.
2.1 The account aggregator framework was officially launched in September 2021, four years after the master guidelines were introduced, following extensive work on technical specifications and discussions with GST, although concerns about sharing data still persist.
2.2 The government's push for financial inclusion has led to the development of a cash flow based lending app, with private sector banks being early adopters due to the powerful concept of reciprocity and the current pain points in data collection for digital lenders.
2.3 Initially, there was reluctance, but after some persistence and encouragement from policy makers, private sector banks joined the account aggregator framework, leading to positive feedback and the government's support, including amending the GST Act and working with public sector banks.
2.4 Public sector banks joined the account aggregator framework in July 2022 after discussions about the benefits for both the banks and the entire financial sector, with regulators like SEBI, IIDA, and PFRDA also pushing for their entities to be onboarded.
2.5 The supply side of account aggregators has been largely sorted, with public sector banks now actively seeking to use the technology, indicating a shift in perception and a move towards embracing its value.
2.6 There is tension between incumbent banks and fintech companies over the custodianship of customer data, but public sector banks have the opportunity to benefit from the account aggregator approach and should focus their energies in the right place.
26:26 🔑 Account aggregators empower customers to switch to providers offering digital experiences, while also benefiting public sector banks, expanding credit opportunities, and including more people in the credit system through the use of telecom data and other signals.
3.1 The customer owns their data and will switch to a provider that offers a digital experience if their current provider does not keep up with digitization trends.
3.2 Large public sector banks can greatly benefit from using a single channel access to different types of financial information, including loan account statements, which can help reduce parallel applications fraud and potentially double their profitability in the next five years.
3.3 Telecom data can provide valuable information about a customer's financial behavior and stability, allowing banks to offer small loans and potentially increase credit opportunities for customers with limited or no credit history.
3.4 There are different segments of customers, including those with good credit history, those new to credit, those with limited transactions, and those without a bank account, and the account aggregator framework can empower them to build their credit history and make banking transactions easier.
3.5 Account aggregators help shift the equilibrium in the banking system by providing access to financial facilities, particularly for the unbanked, and allowing new-to-credit individuals to benefit from additional value.
3.6 The Ambit of financial information can be broadened by looking at other signals, such as utility payments, to include more people in the credit system and enable growth, with the support of regulators, government, and initial adopters.
34:14 📊 Account aggregators simplify credit access for low-income customers by using data collateral, benefiting women and promoting financial inclusion.
4.1 The organization, RSH, is a bottom-up not-for-profit company that played a role in advocating for and facilitating the framework for account aggregators to operate, including the need for bilateral agreements, a central repository of whitelisted IPS, and hosting central techno-legal services for efficient interoperability of the ecosystem.
4.2 Collaboration is needed to address challenges in the account aggregation industry, including determining new financial institution types, incentivizing fraud prevention, and establishing a self-participatory layer of governance to ensure fairness and trust among industry participants.
4.3 Account aggregators can simplify the process of accessing credit for low-income MSM customers by providing trust signals and eliminating the tedious tasks of submitting various documents, ultimately promoting financial inclusion.
4.4 Instead of requiring physical collateral like property, account aggregators can use data collateral such as GST returns and bank statements to provide loans to customers, making the process more efficient and accessible for MSME and low-income customers.
4.5 Microfinance institutions are looking to upgrade their customers from group lending to individual lending, but this transition requires additional credit signals such as bank statements and personal finance management, which can particularly benefit women who are often not in control of their finances.
4.6 Having a branch for women that provides them with an empowering tool to track their accounts and finances can be a starting point for them to understand their financial situation and make informed decisions.
42:54 📊 Account aggregators simplify access to loans, insurance, government schemes, and benefits, while reducing transaction costs for banks and MSMEs, and consumer awareness campaigns are being launched to educate about the benefits of account aggregation.
5.1 Account aggregators can not only meet citizens' needs for loans and insurance, but also ease access to government schemes and benefits, as well as enable LSP-driven lending through the integration of a credit module based on the account aggregator framework.
5.2 The implementation of account aggregators is reducing the cost of transactions for both banks and MSMEs, allowing for smaller loan sizes and the potential for additional data sources to be added in the future, ultimately benefiting the MSMEs.
5.3 Consumer awareness campaigns are being planned and launched by various stakeholders, including regulators, financial institutions, and account aggregators, to address the Last Mile Gap and educate consumers about the possibilities and benefits of account aggregation.
5.4 Oken is a lending-specific DPI that streamlines the lending process for loan service providers, while account aggregator is a module that fits into the lending journey and can be used across any financial service journey.
5.5 The account aggregator model leverages customer intelligence to streamline access to credit at the point of sale, with LSPs acting as extensions of the financial sector to reach a wider network of customers.
5.6 When making a purchase, it is more convenient for me to receive offers for credit or buy now pay later options, as it helps reach the right people at the right time and reduces customer acquisition costs.
55:57 📊 Account aggregators can provide advisory services to help women and low-income households understand their financial status, guide individuals on investing in mutual funds, track subsidies, and assess income and expenses, with the need for experimentation and collaboration to make it a reality.
6.1 There is a need to address the lack of financial knowledge and awareness among women, and there is an opportunity to provide advisory services to help them understand their financial status and make informed decisions based on their risk profile.
6.2 Account aggregators can offer credible advisory services to a wider range of customers, including women and low-income households, by streamlining the process of accessing and summarizing their financial accounts.
6.3 Automated analytics models can provide initial results, allowing advisers to efficiently guide individuals on investing in mutual funds, which is currently low in India, and the account aggregator framework can facilitate this shift, while government schemes can address issues like skill development through conditional cash transfer models.
6.4 Account aggregators can potentially help the government of India track and analyze the total subsidies received by families, identifying inclusion errors and providing a clearer understanding of their financial situation.
6.5 Improve banking narration to capture details of DBT beneficiaries and schemes, making the data available through banking statements for better identification and implementation, with the need for small pilot projects.
6.6 Household-level account aggregation has the potential to provide valuable information for assessing income and expenses, particularly in areas such as microfinance, and there is a need for experimentation and collaboration to make it a reality.
01:02:50 🔑 Account aggregators are valuable for the government and financial institutions, but they need to improve their systems and address critical issues to unlock their true potential, including achieving high success rates, handling large data flows, and ensuring readiness to manage sensitive information.
7.1 The speaker discusses the high value use case of account aggregators for the government and financial institutions, highlighting the need for readiness and addressing some critical issues before unlocking the true value of the technology.
7.2 The account aggregator framework aims to transition from a bilateral trust model to a network trust model, where participants rely on a single legal agreement and common ecosystem participation terms to streamline compliance and resource allocation.
7.3 The speaker discusses the need for a standard checklist for account aggregators to adhere to in order to build network trust and achieve true interoperability, with the challenge being the consolidation of multiple financial accounts into a single data handle.
7.4 The success rates of account aggregators should be at least 95% and ideally 99%, but currently they are lower due to banks needing to improve their core banking solutions to provide data.
7.5 Account aggregators need to improve their systems to handle a larger flow of data and address consumer resistance, and once interoperability and technical health improve, they can promote the account aggregator framework to consumers and financial information providers.
7.6 Fixing certain blocks and ensuring readiness is crucial for account aggregators to manage sensitive information and maintain consistent performance, as it helps reduce transaction costs and legal/compliance hassles, ultimately encouraging people to stay engaged.
01:08:47 🔑 Account aggregators are a powerful tool for improving financial services, enabling innovation, expanding access to loans and products, strengthening data sharing practices, and promoting financial inclusion.
8.1 Account aggregators are an invisible force that provide value by enabling better loans, financial advisory, and other services, and there is a growing imagination and innovation in the financial sector to unlock the potential of account aggregators for various use cases.
8.2 Data aggregators are transforming industries like insurance by utilizing consumer data for quicker risk assessment and expanding insurance offerings to various sectors, leading to groundbreaking innovations in the digital framework.
8.3 Philanthropic capital and businesses can play a role in driving adoption of account aggregators and expanding access to financial services, as social capital is needed to empower innovators and experiment with new ideas before commercial capital can be obtained.
8.4 Account aggregators can enable various businesses, such as loan service providers, FMCG companies, hospitals, and educational institutions, to facilitate loans and offer innovative products to their customers.
8.5 Account aggregators are essential for strengthening data sharing and collection practices across sectors, as they provide a framework to consolidate and share data with real users, enabling financial inclusion and removing transaction friction.
8.6 The value of unlocking account aggregators is significant and the conversation provided relevant numbers and data to contextualize the scale.
Q1: What is the purpose of the account aggregator framework in India?
A1: The account aggregator framework in India serves the purpose of empowering customers to digitally access and share their financial data across institutions in a secure and efficient manner. It enables improved access to banking services and facilitates efficient service delivery through direct benefit transfers and digitization. The framework is built on the concept of reciprocity, allowing financial institutions to share data with explicit consent from customers. This framework is a part of the India stack, a modular block of open APIs that includes identity, data, and payments layers.
Q2: How many financial information providers and users are currently using the account aggregator framework?
A2: Currently, there are 92 financial information providers and approximately 250 financial information users operating within the account aggregator framework in various sectors. These providers and users belong to sectors such as banking, insurance, asset management companies, depositories, and lending. Over 50 users are specifically from the lending sector, while the rest are from AMC’s, insurance companies, and brokerage houses.
Q3: How does the account aggregator framework enable financial inclusion in India?
A3: The account aggregator framework plays a crucial role in promoting financial inclusion in India. It allows customers to link their accounts and share their financial data with explicit consent. This data sharing capability enables financial institutions to assess the creditworthiness of customers, even without traditional credit history. For example, telecom data can serve as a powerful signal for evaluating creditworthiness, providing information about a customer’s residence stability and connection details. Additionally, the framework facilitates the shift from property-based loans to data collateral loans, reducing the burden of submitting multiple documents for loan applications. Ultimately, the account aggregator framework aims to provide access to financial facilities and credit, thereby promoting financial inclusion for the underserved segments of the population.
Q4: What role do technology service providers play in the account aggregator framework?
A4: Technology service providers play a crucial role in the account aggregator framework. They act as intermediaries, synthesizing and analyzing raw digital data in innovative ways. They also develop customized APIs that allow lending service providers (LSPs) to interact with banking and lending partners. LSPs leverage these APIs to make the loan service complex and capital-intensive, catering to different segments such as low-income individuals and micro, small, and medium enterprises (MSMEs). Technology service providers are also capable of offering credible advisory services based on a customer’s financial profile, providing risk assessments and financial capabilities analysis. Additionally, they can introduce innovative products like data analytics and data audit certifications, enhancing the overall effectiveness of the account aggregator framework.
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