India has launched Account Aggregator (AA) system. It is a promise of seamless sharing of financial data between various service providers to provide better financial access to SMEs and individuals. It will facilitate providing financial services even to those with no credit history or collateral. Lending will be very easy once the system gets going. The shared data will be in the encrypted form and the sharing will be after obtaining the consent of the data owner. India will be the pioneer country to provide such a techno-legal framework. It will be a regulated flow of financial information.

There are 8 major banks who have joined the AA network as of now. These are SBI, ICICI, Axis, IDFC First, Kotak, HDFC, and IndusInd and Federal. These represent almost 40 per cent of all bank accounts in the country.

AA framework will be extended to other parts of financial services such as insurance, pension and securities.

AA is akin to UPI used for fund transfer. It has reached 3 billion transactions a month from a modest beginning of 10000 transactions.

Nandan Nilkeni had described the launch of UPI in 2016 as the WhatsApp moment for digital payments. The same is going to be repeated in the financial services sector now on the launch of Account Aggregator (AA) system. The satchet- sized loans will be offered on cash flow predictions. AAs can help lenders to derisk the loan books and reduce NPAs. They will use analytics to the authentically available data.

iSPIRIT, a small group of policy influencers, would set up technology standards for India’s digital markets. It advocates AAs to unlock and bring an audience of 80 per cent in developing countries into formal credit. These do not borrow money from traditional institutions.

AAs will gather digital footprint of people and share these in machine-readable format for a bank loan application. There is layer of consent managers here. These are sub-prime borrowers. These tech firms can match the audience with loans.

Walmart’s PhonePe, a digital wallet, has received an in-principle approval to be an aggregator from the Central bank.