Open Banking in India: How It’s Changing the Way We Bank

Evolving customer expectations and behaviour, regulatory frameworks, and emerging technologies are driving financial institutions to create and innovate solutions and services to meet and define the new normal. Open banking is a new paradigm in financial services that is revolutionizing the way we bank. It allows third-party providers (TPPs) to access consumer financial data from banks and other financial institutions using application programming interfaces (APIs), with the consent of the consumer.

The global open banking market size is expected to reach USD 135.17 billion by 2030, expanding at a CAGR of 27.2% from 2023 to 2030 In India, several factors are contributing to this growth: smartphone penetration, cheap internet access, willingness to adopt and adapt (online payments, e-commerce for example), government digitalization initiatives like Digital India, and the regulatory push to promote open banking.

Building Blocks of Open Banking in India Over Time

India’s foundational approach to public digital infrastructure led to the development of India Stack – a revolutionary digital stack comprising of open APIs and tools used to build a more efficient and transparent government and financial services ecosystem in India. Launched a decade ago with identity digitisation, grown to interoperable payment, India Stack is set to unlock the true potential of data with Open Banking.

India’s approach to open banking is unique, a hybrid model with a combination of government initiatives and private sector participation. The Reserve Bank of India (RBI) has played a foundational role in providing regulatory framework and policies, while private sector players such as the National Payments Corporation of India (NPCI) have developed the technical infrastructure.

Open Banking Applications in India

India has embraced open banking and introduced various applications that are revolutionizing the way financial services operate. A few noteworthy innovations are:

  • CIBIL: India’s first credit bureau built using open banking technology, helping calculate credit scores widely used by banks and financial institutions
  • Payment solutions: UPI is the most used open banking application in India, gained momentum after demonetization in 2016, and has made lives easier by connecting bank accounts, enabling users to carry out real-time transactions and payments
  • Embedded Finance: Embedded finance is the integration of financial services into everyday products and platforms. Think in-app payments, peer-to-peer lending, micro-insurance such as travel insurance while booking your flight tickets.
  • Central KYC: A single KYC repository that connects and verifies an individual’s identity with one click making KYC verification and modification easier and faster

The scale of the open infrastructures is immense; as of May 2023, UPI processed more than 9.4 billion transactions in a month, amounting to more than ₹14.89 lakh crore. These infrastructures extend the benefits across the value chain of financial services industry, including consumers, businesses, fintechs, banks, and other financial institutions.

For customers, it can provide greater control over their financial data, access to better financial services and even personalized financial products.  For businesses, it can open new opportunities to reach and retain customers, improve risk management, ensure compliance, and provide better customer service.

Data-Driven Account Aggregators: A Thriving Opportunity for Fintechs

Account aggregators help individuals securely and digitally access and share information from one institution holding financial information with any other regulated financial institution in the AA network. By making financial data sharing easier, more secure, and more cost-effective, account aggregators can help to create a more efficient and competitive financial services market.

Allowing consent-based flow of data may lead to the growth of new players across sectors such as lending, wealth management, personal finance management, robo-advisory, and even accounting. Moreover, it can usher in a new era of financial inclusion for the financially underserved, with India being the largest microfinance market globally.

Figure: Financial Information Sharing and Consent Process

Impact of Open Banking

  • Hyper-personalization: Open banking can deliver diverse, timely, and accurate financial data that can be used to create tailored and relevant products and services, personalized to the unique needs of the customer. For instance, a TPP could use a consumer’s financial data to create a personalized budget or to recommend the right insurance cover.
  • Sachet-solution for financial inclusion: Formal credit is inaccessible to the MSME sector due to a lack of the right documentation, inadequate collateral, outdated underwriting processes, and high transaction costs. Open banking can solve for these challenges and bring down the transaction cost of lending, investing, and insurance sales, while making sachet sales of lower ticket sizes profitable for businesses
  • Banking 2.0 with improved customer experience: Consent-based, secure data movement can revolutionize the digital journeys of regulated entities. This means reduced operational costs and manual errors, improved ease of use, better customer service, reduced risks, new and innovative products and services.
  • Anti-Money laundering:  Instead of accessing only a fraction of customer financial data, institutions would be able to gain a broader view of the entities they’re doing business with. This would make banks and financial institutions better at detecting fraudulent behaviour and building early warning signals.
  • Financial product innovation: Financial institutions can have access to consolidated data. Timely and reliable data inputs can help develop and innovate financial products and services. For example, a lender could use open banking data to develop a new credit scoring model that is more accurate than traditional credit scoring models.

Key Tenets of Open Banking

While open banking brings new and unique business opportunities, responsibility of creating a successful open banking ecosystem lies with all the stakeholders; from respecting the regulatory compliance to key consideration to adequate data privacy and cybersecurity measures. Successful implementation of the DEPA framework and AA architecture can help India become a data democratic society, embedding consent-granting mechanisms into data transactions, and making data interoperability a reality.

– Prateeksha Rawat

AVP, Marketing at CAMS

About CAMSfinserv

CAMS Financial Information Services Pvt. Ltd., is one of India’s first RBI licensed Account Aggregators. Headquartered in Chennai, the company is a subsidiary of technology-led financial infrastructure and services provider Computer Age Management Services Ltd., (CAMS). CAMS has been an integral part of the Indian Financial Services sector for over three decades providing platform-based services for Asset Management industry, Insurance companies, Pension & Account Aggregator and serves over 350 financial institutions in

the country. CAMS has ~69% market share serving Rs.28 Tn of the Rs.40 Tn MF industry. CAMS and its group companies are regulated by SEBI, IRDAI, PFRDA and RBI.

For more details, visit camsfinserv.com

The differences between UPI and Account Aggregator

Imagine having a centralized platform that allows you to view your financial asset information from all your savings accounts, fixed deposits, investment schemes, insurance premiums, pension saving and others, at once. No more hassle of logging, downloading financial details from multiple platforms, easy access and one-view of your financial health,

Thanks to the Account Aggregator framework, it is no more confined to the realm of imagination

The concept of Account Aggregator was introduced by the Reserve Bank of India to simplify access, and sharing of financial data In simple words, Account Aggregator acts as a ‘data bridge’ between various participants within the financial ecosystem.

Account Aggregator framework is revolutionizing the way financial data is shared. Industry experts predict that it has the potential to replicate the massive success of UPI.

While there is a lot of concept overlapping between UPI and Account Aggregator, it is crucial to know the difference as these are different concepts solving different problems.

This blog aims to help you understand the difference between UPI and Account Aggregator.

What is UPI and what problems does it solve?

Unified Payment Interface (UPI) is a smartphone-based digital payments system that enables you to transfer money between bank accounts via mobile phone.

The most significant advantage of UPI payment is that you can make instant real-time payments without divulging your bank details, which makes it a secure, convenient and quick payment option. It eliminates the need to carry cash, a debit card, or a credit card; making it simpler to conduct transactions on the go.

The utility of UPI extends far beyond transferring funds between bank accounts. With UPI, you can seamlessly pay your utility bills, recharge your mobile, make quick and secure payments on e-commerce websites, pay insurance premiums, invest in mutual funds and even facilitate barcode-based transactions. The possibilities are endless, making UPI a versatile and popular payment method for a variety of use cases.

What is Account Aggregator and what problems does it solve?

Account Aggregator is introduced by the Reserve Bank of India (RBI) to facilitate information sharing between Financial Information Providers (FIPs) and Financial Information Users (FIUs) after due customer consent.

Account Aggregator allows you to effortlessly access and review your financial information from various sources, such as bank accounts, stock accounts, insurance policies, GST data,  investment details, and more, all on a single screen. This consolidated view of financial assets simplifies the management of finances and allows for more informed decision-making.

Furthermore, account aggregation enables a secure sharing of financial information within financial institutions, making it easier to onboard, transact, consolidate a range of financial products. The use cases for Account Aggregator varies far and wide – from obtaining loans or collaborating with wealth managers to plan and optimize investment portfolios to identifying potential fraud cases and risk mitigation

The differences between UPI and Account Aggregator 

  • Integration with other financial institutions

UPI is an instant payment system that facilitates fund transfers between two bank accounts, meaning its infrastructure is  connected only to banks. On the other hand, Account Aggregator offers a much broader scope, as it’s  impact and usage is extended to all the  financial institutions and all the four regulators.

  • Focus area

While both UPI and Account Aggregator are digital public infrastructures, and here is where the simjlarity ends.. UPI is primarily focused on the ‘transfer of money’ whereas Account Aggregator is focused on the ‘transfer of financial data’.  

UPI infrastructure is connected only to banks, while AA links all financial institutions including Banks, NBFCs, Insurance companies, Broking companies, CRAs and others, thus much wider in scope and application.

  • Governing authority

National Payments Corporation of India (NPCI), a non-profit organisation set up by the Government of India regulates UPI transactions and prescribes rules and regulations that govern the usage of the system. NPCI ensures the safety and security of UPI transactions, as well as promotes the growth and adoption of digital payments in India. On the other hand, Account Aggregator is an RBI-regulated entity that is required to comply with various policies and regulations that the RBI has put in place to promote fair and responsible behaviour. The RBI’s regulations ensure that the data privacy and security of customers are protected and that financial institutions adhere to responsible lending practices. Sahamati also plays a crucial role in promoting and strengthening the Account Aggregator ecosystem. Sahamati is an industry alliance that operates in a self-organized manner to facilitate coordination among various players in the Account Aggregator ecosystem. It establishes fundamental guidelines and a code of conduct for the ecosystem.

Conclusion

The Account Aggregator framework in India is being hailed as a revolutionary concept, much like the UPI system that transformed digital payments. And rightfully so. Though it is still early days for Account Aggregator, the impact and application is immense and is the future of financial information sharing.

For more details visit our official site : https://www.camsfinserv.com/

RBI Brings GST Under Account Aggregator Framework

Indian economy will be fastest growing economy in the world in FY23. World bank forecasts India to grow at 6.6% as compared to Global forecast of 1.7%.  Amongst the key factors driving country’s economic transformation is its rapidly growing digital economy. The value of digital economy is expected to increase from $300Bn to S1Tn by FY27 with GDP contribution increasing from 9% to 20% in this period.

Amongst the key game changing initiatives forming the bedrock of this transformational journey is Unified Payment Interface (UPI), Government e-Marketplace (GEM), Open Credit Enablement Network (OCEN), and Goods & Service Tax Network (GSTN).

Application Programming Interfaces (APIs) integrations with wide ranging fintech platforms and apps is the backbone of this credit system transformation. Account Aggregator has a key role to play in this ecosystem – the role of consent managers for sharing customer’s financial data with the ecosystem participants. This will enable digital lenders to build unparallel ability to underwrite SMEs digitally and in near real-time – all this, based on the trustworthy and consent-based data captured from customer’s cashflows and existing credit lines!

In a major development, The Reserve Bank of India (RBI) has brought the Goods and Services Tax Network (GSTN) under the realm of the Account Aggregator (AA) framework as a Financial Information Provider (FIP).

A FIP serves as a data repository for an account aggregator. It holds the “Financial Information” of customers and securely shares it with the account aggregator upon receiving explicit consent from the customer. FIPs include banks, banking companies, non-banking financial companies, asset management companies, mutual funds, pension funds, insurance companies, insurance repositories, depository, depository participants and such other entities.

GSTN, the technology backbone of GST, has 1.41 crore registered taxpayers.GSTN inclusion in the AA network would give financial institutions access to data regarding small businesses and in turn would facilitate cash flow-based lending to Micro, Small and Medium Enterprises (MSMEs).

The Department of Revenue shall act as the regulator of GSTN for this specific purpose and furnish financial information via GST returns, viz. Form GSTR-1 and Form GSTR-3B. Before we understand the impact of GST inclusion in the AA network, let us get a brief understanding of what is an account aggregator system and how does it work.

Understanding Account Aggregator Framework

Account Aggregators are RBI-regulated licensed Non-Banking Finance Companies (NBFCs) that enable instant and secure exchange of financial data between individuals and financial institutions via a digital medium.

The consent-based data-sharing system has revolutionized investing and credit, while empowering consumers to have greater control over their personal financial data.

Financial institutions can easily access and review this information on the fly before providing a loan to an individual or an entity. Not just that, based on the information, they can in fact offer customised services to people. Furthermore, it facilitates wealth managers in effective investment planning. 

So far, around 4.1 million cumulative accounts have been linked to the AA network along with major public and private sector banks and NBFCs.

What Impact will The GST Inclusion in The Account Aggregator Network Bring?

  • Data Accessibility

GSTN inclusion in the list of financial information providers under the Account Aggregator framework will enable businesses to digitally share GST-related financial data such as invoices and tax returns with authorized parties such as banks and other financial institutions in a secure and efficient manner. This will enhance the overall experience of businesses, saving them time and resources. There will be no requirement for manual data sharing with multiple stakeholders via different channels – required data will be available and accessible for all.

  • Prevention of Fraud

The integration of GSTN with the AA network will also help to streamline the process of obtaining loans and other financial services for businesses. This in turn will help to identify and prevent fraud.

  • Lending and Access to Institutional Credit

It will be a boon for the MSMEs as it will facilitate cash flow-based lending. Unlike traditional approaches, where lending is based on the balance sheet and projection-based data, cash flow-based data with GST details will change the lending spectrum for MSMEs.

It will be easy for MSMEs to have access to institutional credit as they no longer be dependent on n private money lenders for obtaining loans to meet their working capital requirements. Access to institutional credit will also help businesses grow and scale. Moreover, it will help small businesses build a strong credit history which will enable them to secure larger loans to scale up their business.

  • Ease of Accessing Credit-Worthiness

GSTN integration will provide the most authentic picture of the borrower to lenders thus helping them in the credit decision-making process. It will enable financial institutions to assess the credit-worthiness of the MSMEs through verifiable and trusted data. Moreover, with easily accessible data, financial institutions will be able to significantly reduce the time to disburse credit to borrowers.

The Bottom Line

RBI’s move to include GSTN will give an impetus to start-ups and small organisations and ease their credit procurement process.

India is witnessing a digital transformation and the Account Aggregation framework will be a key-factor in India’s next big digital revolution. 

How Can CAMSfinserv Help?

CAMSfinserv is a licensed Account Aggregator in India that enables real-time, secure and consent-based sharing of financial asset information in order to benefit the key stakeholders viz. customers, financial institutions and businesses. We facilitate reliable data sharing while ensuring the highest standards of data integrity and security.

Get on CAMSfinserv platform today and unlock the power of financial asset information with us.

The Minister of Finance directs all PSUs to onboard the Account Aggregator framework for the benefit of the entire ecosystem

In February 2022, Finance Minister Nirmala Sitharaman instructed all Public Sector Undertakings (PSUs) in India to onboard the Account Aggregator framework by end of July 2022. The Centre’s digital initiative aims to improve the credit flow for small borrowers and advance digital lending.

In 2016, the Reserve Bank of India approved a new class of Non-Banking Finance Companies that could operate as Account Aggregators. Over a period, the Account Aggregator model has been refined, with a better definition and understanding of their role in the ecosystem, leading to a public account aggregator launch in September 2021.

With the launch of the Account Aggregation framework, the Reserve Bank of India has been able to successfully bridge the gap between the demand and supply of retail lending. It facilitates a seamless flow of credit to a huge borrower base who do not have a significant credit history thus boosting financial inclusion. Furthermore, the account aggregator ecosystem helps banks to leverage user data with customers’ consent to offer better services. It eases the accessibility of financial data.

The account aggregation system has revolutionised investing and credit thereby offering consumers better access and control over their personal financial data and expanding the huge potential customer base for lenders and FinTech companies.

If you look at the numbers, at present 6 account aggregators have an operating license from the RBI and 8 finTech entities hold in-principle approval from the RBI to operate as account aggregators.

As of August 2022, almost 22 major public and private sector banks are reportedly live on the account aggregation system, bringing an estimated 1.1 billion customer bank accounts in its kitty.  

As more and more participants join the account aggregator network, the scale and scope of data available on the network will be truly staggering enabling a higher number of customers to link and share data for their self-benefit.

Before we get into the details of how the account aggregator model benefits the ecosystem, let us understand who are account aggregators and what is their role in the ecosystem.

Who Are Account Aggregators And What Is Their Role?

Account Aggregators are RBI-approved and regulated entities that enable customers to securely and digitally access and share their financial data from one financial institution they have an account with to another financial institution in the account aggregator network. 

Account aggregator facilitates sharing of financial information on a real-time basis between regulated entities like banks, insurance companies, pension funds and assets management companies.

The information can only be shared with the consent of the customer. Moreover, the account aggregator themselves cannot see the information being shared which lends safety and security of data to customers.

In technical terms, account aggregators enable secure information sharing between Financial Information Providers (FIPs) and Financial Information Users (FIUs). To understand in a simple way, FIPs are financial institutions that possess customer data and FIUs are financial institutions that use customer data to offer a range of financial services like underwriting loans, wealth management, etc.

It is worth noting that the FIPs and FIUs can be the same entities too. For example, let’s say you have opened a bank account with Union Bank. By this means, Union Bank becomes a FIP and collects all your financial data like transactions history, credit discipline, etc. Now let’s say, if in the future you seek a loan from Union Bank, it can act as a FIU and use your data to access your creditworthiness before deciding to offer you a loan.

https://sahamati.org.in/wp-content/uploads/2022/03/Screenshot-2022-01-28-at-9.48-1.png%5B1%5D

How Onboarding Account Aggregator System Benefits the Ecosystem?

The account aggregator framework benefits all the participants of the ecosystem. Let us see how.

  • How it Benefits Customers

The account aggregator system solves the biggest problem of the customers i.e. bringing the scattered data spread across silos in data warehouses of financial institutions, government bodies and other entities at one single place and share it (with consent) in an encrypted manner. This enables customers to avail various financial services from a host of providers in an easy manner and they don’t have to run around to gather their financial data from various sources.

For instance, an account aggregator system when coupled with emerging technology could ease you the hassles of viewing six different bank statements every month by combining all the statements into one. Imagine the amount of time you would save!

Furthermore, it offers greater control to customers to decide who gets access to their data, view and track its movement and eliminate the potential risk of information breach in transit. Customers have the power to choose what financial data to share, with which entity and for what purpose. They can even revoke access to their consent anytime they wish.

The account aggregator framework empowers customers and makes it easier and safer for them to share their data for their own benefit. For instance, with the account aggregator framework they can easily secure low-value, low-tenure, cashflow-based credit using their banking and GSTN data. 

Last but not the least, it also simplifies the otherwise cumbersome procedures while taking a loan or other financial services. It saves customers from the hassles of using complicated internet banking portals, submitting physical documents for availing financial services, risks of information leakage and document tampering and seeking out physical notarisation to share their financial documents securely.  With account aggregator framework, customers can easily consolidate their financial data at one place and provide financial service providers a single digital framework to share data in real-time. This in turn saves time, improves coordination and reduces confusion among financial service providers and customers.

In short, the account aggregator system proves to be a time-saving, safe and secure mechanism for customers.

  • How it Benefits Banks and Financial Institutions

The account aggregator framework helps streamline the lending sector. It helps banks and financial institutions make better lending decisions, assess the creditworthiness of the borrower more efficiently, and prevent bad loans and non-performing assets.

It drastically reduces the time taken by banks and financial institutions to verify customer documents.

Banks benefit from availing verified and consented data. It helps them reduce the transaction costs which in turn enables them to provide lower ticket size loans and swift baking services at a reduced cost.

The new framework also makes it easier for banks and financial institutions to gather data. Moreover, with the complete financial profile of the customers in a single place, they can gauge the customer’s immediate as well as long-term requirements in a better way and offer tailor-made financial products.

Furthermore, it eliminates the chances of error on the part of service providers as all the information of every synced account is available online and regularly updated.

  • How it Benefits Economy

The account aggregator model largely benefits the economy by expanding the credit system and making wealth planning more effective. It facilitates easy access to financial data and boosts financial inclusion.

The new framework has the potential to address the existing credit crunch in the economy which pertains due to inadequate organised data sharing mechanisms. Account aggregator system is expected to channelise formal lending system thereby boosting consumption and investment.

This digital infrastructure makes it seamless and accessible for everyone to avail of financial services like loans and credit facilities.

Conclusion

The Account Aggregator framework is expected to unleash India’s next wave of financial inclusion and FinTech innovation. It is a big step towards a connected financial ecosystem which brings together data from myriad sources in one place for its effective use. Experts believe that this new digital framework is going to bring massive data transformation. 

How Can CAMSfinserv Help?

CAMSfinserv is a licensed account aggregator in India with a huge network of FIPs. We offer account aggregation services to PSUs, banks, NBFCs, mutual fund houses, insurance providers and other entities and onboard the account aggregator ecosystem to offer a great experience to their customers.

Please visit our website : https://www.camsfinserv.com/

How can Account Aggregators help reduce cost of lending?

  • Large scale opening of Jandhan accounts ensured all benefits via Government welfare schemes reached the right beneficiary
  • Connecting Aadhar with bank account numbers ensured the last mile identification of the citizen who is the intended recipient.
  • Ecommerce revolutionised the way people shop and challenged the existence of brick and mortar model of doing business.
  • Mobile wallets and UPI payments revolutionised how money changes hands

What’s the next big impact initiative that is brewing in financial services?

India is marching ahead to embrace account aggregators that would revolutionise the lending and credit ecosystem.

Account aggregation is well poised to bring in the next revolution in the lending industry. It involves the secure sharing of sensitive financial asset data of users between financial institutions- thereby allowing access to easy credit facilities. Let’s understand this in detail.

What are Account Aggregators?

Account Aggregators are RBI-licensed NBFCs that act as a platform for financial data transfer. They allow their customers’ financial asset data to be transferred from one entity to another, on customers’ behalf and only with consent from them.  Thus, through account aggregators, customers can share their financial data from a financial institution with which they currently transact to another with which they want to transact. Say, for instance, an individual has an account with Bank A and is seeking a loan from Bank B,  through account aggregators, one can collect the financial data from Bank A and share it with Bank B, completely digitally.

How do account aggregators work?

The account aggregator framework consists mainly of three entities –

  1. Financial Information Providers (FIPs), financial institutions that have financial data, like an individual’s bank, mutual fund company, etc.
  2. Financial Information Users (FIU), financial institutions that need an individual’s financial data for offering their services
  3. The customer, who is in between FIPs and FIUs

Account aggregators aggregate all financial asset data of their customers from FIPs. Thereafter, FIUs can access this data once the customer gives the consent in the AA platform.

Benefits of account aggregators

The account aggregator framework is an innovative idea by the RBI intended to benefit both customers (borrowers) and financial institutions (lenders). Here’s how –

Benefit to borrowers, i.e., customersBenefit to lenders, i.e., financial institutions
Encrypted data transfer with no chance of a leak or a fraudEasy availability of loans and other forms of credit for new borrowers, both retail and corporate, who might not have a credit history Control over the data which is being shared as sharing is not allowed without customers’ consentAccess to the complete financial asset data of potential borrowers which makes loan underwriting simpler   No chances of fraudulent data sharing   Reduced cost of lending   Reliability of data is high as it is directly shipped from the FIP to the lender without any possible manual interventionHuge time and cost saving as the data is 100% machine readable and transformation is not required

In fact, for lenders, account aggregation is extremely useful as it brings down their cost of lending substantially. Let’s understand how.

How can account aggregation bring down lending costs?

  • Easier access to information

With account aggregation lenders can get easy access to the financial asset related information of prospective borrowers. The data sharing is done in real time allowing lenders easy and instant access to information so that the loan can be approved quickly.

  • Banking the underbanked

Despite the reach of financial institutions in remote areas, a large segment of the population does not have a credit score. Moreover, they submit their bank statements in paper format which can be fraudulently manipulated. This scenario is expected to change with the account aggregation framework. With the host of financial asset information available for new borrowers and SMEs with limited finances offering loans would become easier. Lenders can sanction loans based on the financial assets held by such borrowers and their cash flow.

  • The underwriting advantage

Being an online ecosystem, account aggregation offers digital data transfer to lenders making it quicker for their underwriting department to get access to data. This can lead to digital underwriting which, when triangulated with credit scores, can bring down the underwriting costs. Moreover, the underwriting job would become easier and smoother with a larger flow of data to assess.

  • Bringing down the cost of fraud detection

Online data, sourced from authorised FIPs, eliminates the possibility of frauds on the borrower’s part. The possibility of manipulating physical bank statements or cooking books becomes nil. This accurate and tamper-proof data brings down the cost of fraud detection for lenders.

  • Deeper insights

The overdraft limit utilization by the customer is a red flag for lenders which is not reflected in credit reports prepared by credit rating agencies. However, with account information accessible on the account aggregator platform, lenders can get a heads-up about such utilization which would help them determine the risk profile of the customer.

  • Reduction in administrative and operating costs

Since the borrower’s information is centrally available, the administrative costs of assimilating the same is cut down considerably.

When it comes to operating costs, a major proportion of such costs is spent in monitoring the loan sanctioned, i.e., assessing whether the loan funds are being used for the purpose for which they were availed in the first place. If the FIUs avail of a consent from the borrower to monitor their bank accounts monthly, the operating costs would be drastically reduced since the account details are accessible online.

  • Cost cutting in prepayment and foreclosure cases

In the case of bulk prepayments, lenders require last 3 months’ bank statements to ascertain the source of funds. This would become a cakewalk, courtesy of the account aggregation network, saving lenders considerable costs in requesting for and assessing bank statements of borrowers.

If the borrower forecloses the loan, he might be eligible for a refund of the excess interest paid on the outstanding loan. The quantum of this excess interest can be quickly traced through the account aggregation platform making for quicker reconciliation of loan accounts. This reduces the cost of closing the loan.

Furthermore, as the lending process is digitized and streamlined, it becomes cost-effective. Lenders can also benefit from economies of scale if they enhance their lending activities and sanction more loans. Call us on +919840851314 or email bd@camsfinserv.com to experience real-time account aggregation and see how it can benefit your business.

Please visit our website : https://www.camsfinserv.com/

Financial Institutions in India can now plug-and-play into the Account Aggregator Platform

TSP SaaS solutions like Sterling Finduit enable financial institutions to integrate into the Account Aggregator eco-system and access customers’ financial information with no integration challenges. 

What is Account Aggregator?

Account Aggregator is the most talked about Fintech disruption in recent times. It is a framework mooted by RBI, and is a consent based digital framework that can collect customer’s complete financial data residing in silos with multiple entities, and serve it to Financial institutions in an encrypted format. With this data access, Financial Information Users (FIU) such as loan providers and wealth managers can make the right lending decisions and provide more informed investment choices.

The AA (Account Aggregator) system allows the customers to share their financial information in an encrypted format from multiple Financial Information Providers (FIP) to an FIU through a centralized API-based system.

AA can help reduce cost and time for banks in their loan approval process thus enabling lower ticket size loans. Further, periodic consent allows the banks to create new lending models based on cash flow rather than credit history alone. Finally, the AA platform also helps the service providers eliminate fraud risk from paper or pdf based statements.

With top banks in India like Axis, ICICI, HDFC and others joining the Account Aggregation framework, it has the potential to be a truly transformative initiative for millions of individuals and businesses.

Integrating into the Account Aggregator System

While the advantages of AA are tremendous for both institutions and customers, there is the need for a robust technical architecture to transfer and decode the data effectively. The customer interacts with the AA system through an app/ web-based application (AA client) to provide consent. Further, the ecosystem runs using a set of standard APIs that will facilitate secure, seamless and consent-based sharing of various kinds of financial information between the various players. 

To create this architecture and generate the APIs required to become integrated with the AA system, Financial Information Users and Financial Information Providers can seek out Technical Service Providers (TSP) specialised in AA. 

Technical Service Providers – The What and the Why 

Account Aggregator

TSP or Technical Service Providers are companies that provide integration solutions that connect FIU and FIP to the account aggregator framework. 

While some financial institutions can develop their own solutions to participate in AA framework, here are some reasons why most financial entities choose a TSP to on-board the AA system:

  1. TSP solution has modules that seamlessly connect a company’s existing solution to the AA ecosystem and act as a single point to handle all the integration architecture, helping financial institutions save time in their integrations. This allows the FIP (Financial Information Providers) and FIU (Financial Information users) to concentrate on their core business.
  1. Working with a TSP partner who is an expert in AA architecture will help with a faster rollout and provide timely feature updates. This also ensures that the enterprise catches up with ever evolving AA tech standards as mandated by ReBIT (Reserve Bank Information Technology Private Limited).
  1. As of today, ReBIT mandated APIs are a bit tedious for enterprises to implement as it require digital signature and implementation of advanced cryptography. TSP takes care of these challenges so that FIP and FIU can quickly access the AA platform with a plug and play set up.
  1. TSP solutions can bring readymade dashboards, scorecards and models for data analysis which can serve as inputs for proprietary analytical tools of the FIU. 
  1. TSP solutions are interoperable – which means that they can be integrated with all account aggregators and cover all use cases for FIU. They can also help refine and curate the customer journeys to facilitate trust and enable financial institutions to make their service easier for the end customer to access. 

 So why take the stairs when you can take the elevator instead?

A one-stop entry to the world of AA for Financial Institutions – CAMSfinserv + Sterling Finduit 

For a financial Institution looking to get onboarded to the AA ecosystem, choosing the right AA and TSP might be a cumbersome task. While there are seven licensed Account Aggregators in India, CAMSfinserv AA stands out in its commitment to making the process of onboarding simpler for its partners.

To make the process of onboarding easier for its partners, CAMSfinserv has partnered with Sterling Software, a Technology Service Provider to bring Finduit – a simple and ReBIT compliant plug and play solution into the AA platform. Finduit comes equipped with the RBI mandated APIs and digital signatures to enable smooth onboarding and data flow for the partner institutions. Sterling Software Private Limited is a fully owned subsidiary of the CAMS group, having decades of market experience and trusted by the largest financial institutions in the country.

Together CAMSfinserv + Finduit could be the faster, simpler and most secure entryway to the Account Aggregator space for a Financial Institution. 

For More Details Please Visit Our Website :
https://www.camsfinserv.com/

Reach out to us at sales@sterlingsoftware.co.in or visit https://sterlingsoftware.global/contact/.

Account Aggregation- Why is it a revolution in the FinTech Arena?

Exploring the macro benefits Account Aggregators brings into the country’s economy

Tracing the origin of Account Aggregators

The establishment of NBFC Account Aggregators stems from a need for a national digital infrastructure for simpler, faster and authentic, financial asset information exchange. They are formed as a new class of Non-Banking Financial Companies, which is part of a digital public infrastructure, developed in collaboration with major financial regulators in India. AAs are created to manage content in the area of Financial Data Sharing and to streamline its access to payment and Financial Service Providers. NBFC Account Aggregators in India like CAMSfinserv can hence be considered as technology intermediaries between Financial Information Users (FIU) such as lenders (banks/nbfc’s), insurance companies and wealth managers and those holding the required financial data i.e., Financial Information Providers (FIP) like Mutual Funds, Banks, deposit taking NBFC’s, Depositories, Pension Providers and GST Network. Account Aggregation is about consent based collection of the required data from FIPs and passing it on to FIUs in an encrypted manner.

Any company registered or regulated by any of the 4 regulators – Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA) can be an FIP or FIU (and sometimes both). Every stakeholder would accrue benefits unique to their position in the NBFC Account Aggregator ecosystem.

A schematic on how NBFC Account Aggregators in India functions

The macro impact of Account Aggregators on the Indian economy, and on its citizens

Utilization of Digital public goods to democratize credit and empower people – In contrast to western economies, individuals and small businesses in India have become data rich before being economically well to do. Through the Account Aggregation platform, the billion plus population gets an opportunity to leverage the Digital Public Goods available to them to better their lives. Individuals and small businesses would be able to take control of how their financial assets related information is digitally shared and utilized, for their advantage. Knowledge asymmetry will be reduced and will lead to financial inclusion. With the Account Aggregator ecosystem, the world of credit which is rife with information asymmetry, will be converted to lending based on information capital, which gives people control of their data.

Bypassing the obstacle of lack of credit history– The process of new credit evaluation has historically been based on past credit history. However, a large segment of our population currently do not have a formal credit history, as they are either new to the banking system or do not have sufficient collateral to obtain a loan.  Tangible capital as collateral is the key to lending till now and the poor and the young take time to accumulate tangible collateral. With changes in life circumstances, employment and better opportunities, their ability to repay debt becomes better over time. The access to that relevant information is more direct with the AA ecosystem. With Account Aggregator, credit reaches faster to people who currently are eligible for credit and also to people who are currently not eligible for credit.

 Mitigating the challenges Indian SMEs face to access credit – Like Individuals, traditional lending to SMEs is also steered by the idea of tangible collaterals. With AA, there is a paradigm shift to cash flow based lending and focus on the profitability of the business. The lesser cost and time taken in verification of data by lenders would make access to loans quicker and affordable, resulting in a broader spectrum of borrowers. With balance sheets giving way to cash flow, better screening, early alerts, and authentic, clean consolidated information on borrowers become easily accessible. The possibility of loss of data integrity and dilution that happens through cross referencing is also eliminated. The Borrowers would be using bank statements and tax returns instead of their balance sheets to avail of short-term loans.

The Account Aggregator framework is expected to revolutionize lending, wealth management and financial planning in the next few years, as individuals start to control the flow of their data held currently in silos across various financial institutions. Lending based on invoices, cash flow, payments and receipts leads to financial inclusion of never before seen proportion. For eg: India has about 18 to 20 lac crore of lendable invoices which are on GST and the current MSME loan book size is about 19 lac crores. So just by using the GST invoice financing we could double the amount of lending for the sector.

Consolidation of financial data leading to scalability in data availability -More and more FIPs and FIUs are signing up to be part of the Account Aggregator ecosystem. Better access, ease of data collection and greater authenticity are the obvious benefits of this widening of the network. This eventually helps in envisioning a seamless macro picture of the borrower -both Individual and SMEs. Account Aggregation effectively utilizes the digital footprints of Indians  and expands the data mining possibilities.

Better data access for a virtuous cycle of positive incentivization -World over the perception about data sharing is always fraught with edginess of the Data Principal. Data leaks, misuse and fake data are all primary factors causing inhibition in data sharing. NBFC Account Aggregators not only take the lead in protecting users from misuse of their data, but work on how data can be used to empower them and use it for their benefit. With the game changing feature of data empowerment architecture, India’s economic outlook has become way more futuristic than any other country in the world has been able to envision or execute. The incentives attached in coming into the folds of the new system outweigh any fear associated with data security. (hyperlink to data security blog) 

Salient features of Data Security and consent in the Account Aggregator environment 

This brings us to the most important point of data security. As per Mr N.R. Sudarshan, Vice President, CAMSfinserv, the salient features of consent from the Account Aggregation perspective is that “Users will be able to revoke consent to share data and will also be able to share individual items of data without sharing the full history.” Consent can be checked, paused, revoked by the User anytime and is valid for only linked accounts. Consent in data sharing/ security is a programmable consent which can be conditional and stipulated with specifics. Consent here is refined in architecture, defined in a programmable way and is not a generic one. Finally, The Account Aggregator cannot use or store the financial assets related data of the investors as they are completely data blind.

Future possibilities in the architecture that look beyond Financial Aggregators

Scalability is a key attribute of NBFC Account Aggregators. While the initial focus of the idea is the financial sector, the architecture of the Account Aggregation platform is industry agnostic. With Plug-ins of more data like income tax, telecom or health records; richer data possibilities emerge and advancements in quality of life, better health care, education, access to loans etc becomes more than just dreams. More recently, transactional and locational data gathered from these potential borrower activities including online activities have been used by banks to lessen their dependence on tangible collaterals. A readily available consent based data sharing system which is both user and business friendly with low transaction costs is essential for consumers and businesses to share data for their benefit. For example: At present, the Telecom data pertaining to a person’s pattern of expenditure on communication needs (mobile and data bills, internet subscriptions etc) are not directly useful in availing finance. But with advancements in data science technology this data could become relevant and allow firms with low value collaterals (but high communication spends) be able to prove their credit worthiness and avail finance.

How to partner with the Best Financial Account Aggregator?

When it comes to choosing an Account Aggregator to work and grow with, credentials have to be a prime consideration. What you need is a player who balances the trust along with the edge brought in by tech sophistication. And that is what CAMSfinserv is all about. An Account Aggregator like CAMSfinserv brings to you a world class Account Aggregator platform from the house of CAMS which has served India as a financial infrastructure for over two decades.

Do get in touch with Mr. N. R Sudarshan from CAMSfinserv at +91 984 085 1314 / write to bd@camsfinserv.com to request a product demo or to just to start a conversation and know more about us!

Unlock the power of financial asset information by clicking here for details-> www.camsfinserv.com