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The Reserve Bank of India is taking extensive steps to unlock the economic primitives of data, identity, and payments as India prepares for the internet age. The addition of the Account Aggregator Framework is another step in this direction.
Introduced as a consent layer, the Account Aggregator Framework aims to strengthen India’s data stack. It gives citizens the power to share their data only when they consent and when an electronic consent framework captures it.
The early adopters of this framework including many banks and NBFCs have witnessed efficiency gains despite a few initial hiccups. Some initial gains include,
- Lower drop-offs with optimised customer journeys,
- Higher conversion rates
- Reduced operational costs
- Lower default rates
- Nil fraud rates
- Net positive impact on profitability
As the ecosystem matures, adopters are hoping to see these gains translate into more cost-effective and viable business models, and unlock many massive value-adds for citizens and the entire financial sector.
Current Trends and Landscape Of The Account Aggregator Ecosystem
Existing Participants
In September 2021, when the RBI officially launched the Account Aggregator Framework. Since then, the following entities have become a part of the ecosystem –
- 23 banks and 3 life insurance companies have gone live as financial service providers on the Account Aggregator, India Stack platform.
- 78 entities registered and regulated with either of the four institutions – RBI, SEBI, IRDAI, PFRDA – are live as financial information user
- 1.1 billion-plus accounts have been enabled using the Account Aggregator Framework
- 6 operational account aggregators and another 9 in-principle account aggregators are yet to receive their operating licence from RBI.
- As on October 31, 2022, 2.05 million plus customers have used the services of one of the RBI-authorised account aggregators to give consent and successfully share their data across platforms
Here’s a holistic view of the existing partnership in the Account Aggregator Ecosystem.
Performance Report
As mentioned above, the account aggregator framework successfully enabled over 1.1 billion accounts on its platform till October 31, 2022. These accounts primarily include –
- Singly held savings accounts
- Sole proprietorship current accounts
Meanwhile, 2 million plus annual cumulative consents have been successfully fulfilled. This has resulted in smooth data sharing from financial service providers to financial information users.
At present, the usage penetration of account aggregators is at just 0.2%. Meanwhile, the monthly growth rate has been stable at 50-60%, thus showcasing sustained and continued progress.
Emerging Use Cases in Account Aggregator Framework
Pertaining to the initial success of this framework, many other sectors are now planning to explore the ecosystem and reap the benefits. For instance, the securities market players, insurance companies, and the pension sector are also entering the space. Besides these, many other entities have started a closed user group testing phase of account aggregators. They are doing it to check the viability of their respective business use cases.
Early Benefits Of The Ecosystem
As mentioned above, the Account Aggregator Framework has helped its users witness growth in volume. Apart from that, they have seen lower drop-off rates, decreased operational costs and reduced fraud rates. However, there’s more to it. Here’s a sneak peek –
- As per Sahamati, loans worth INR 17 billion have been disbursed through the Account Aggregator Framework to date
- 50% of the lending was done as unsecured business loans to MSMEs. These loans were with ticket sizes of up to INR 4 lakh
- Established the powerful role that Account Aggregators can play in helping boost financial inclusion and credit democratisation
- Banks and NBFCs that used this framework reported zero fraud cases
- Nil fraud rate has
- Reduced the otherwise high operational cost incurred by banks/NBFCs for investigation. They investigated to filter out a bank statement submitted by a customer
- Lowered the credit costs linked with frauds that go undetected before loan disbursements despite a series of checks.
Expected Growth Opportunities with Account Aggregator Framework
Considering the current success rate of this framework and the emerging use cases, it is expected that data transfers would reach 1 billion by the end of 2025 and 5 billion by the end of 2027.
Meanwhile, bank account statements serve as the most legit source of customer authentication among others. Banks and NBFCs will soon increase data transfers of bank account statements via the Account Aggregator ecosystem to boost many lending activities. But, of course, only after receiving the customer’s consent.
It’s also believed that RBI may soon consider sharing unmasked bank account numbers (currently masked) through the Account Aggregator Framework. This would not only replace the present bank account verification mechanism done through the submission of cancelled cheques or penny drops but further increase the velocity of disbursals.
Conclusion
The RBI-led Account Aggregator Framework comes with its list of benefits and challenges. The benefits are massive value adds for both citizens and the financial sector. These advantages are in terms of higher disbursals, better customer journeys, reduced operational costs, quicker and hassle-free processes, and much more. Moreover, achieving interoperability and deepening usage, and wider innovation will also play a key role in the success of this framework.
But, considering the implementation strategies that the RBI has used to make India Stack a success, it’s just a matter of time to see the Account Aggregator Framework become an integral part of the financial system.
