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In Context
- Recently, eight of India’s major banks joined the Account Aggregator (AA) network.
About
- AA framework was created through an inter-regulatory decision by RBI and other regulators.
- Based on the Data Empowerment and Protection Architecture (DEPA) framework
- It allows users to securely access their data and share the same with third parties
What is an Account Aggregator?
- It is a non-banking financial company engaged in the business of providing, under a contract, the service of retrieving or collecting financial information of its customers.
- Engaged in consolidating, organising and presenting such information to the customer or any other financial information user as specified by the bank.
- Data cannot be shared without the consent of the individual.
- The licence for AAs is issued by the RBI.
Working of AA
- It has a three-tier structure: Account Aggregator (AA), FIP (Financial Information Provider) and FIU (Financial Information User).
- A FIP is the data fiduciary, which holds customers’ data. It can be a bank, NBFC, mutual fund, insurance repository or pension fund repository.
- An FIU consumes the data from a FIP to provide various services to the consumer. An FIU is a lending bank that wants access to the borrower’s data to determine if the borrower qualifies for a loan.
- Banks play a dual role – as a FIP and as an FIU.
Image Courtesy: Moneycontrol
Benefits
- Hasslefree & prompt Services: Replaces hassles (physical & scanned copies), with a simple, mobile-based, and safe digital data access & sharing process.
- Cost Reduction: Allow banks to access consented data flow & create new services.
- Fraud Reduction: ↓ frauds and compliance with upcoming privacy laws.
- Less Physical interaction & Corporate Governance: No tampering of records.
Challenges
- Issue of data ethics: Do not enforce any standards on the acquisition of data by FIU.
- Possibility of abuse and data mining: Data Privacy issue
- Problems with the Consent Collection: Poor understanding of individuals regarding consent.
- Technical glitches
Way Forward
- The PDP Bill, 2019 provides a lens to understand how data privacy and security can be applicable to the users of the NBFC–AA system.
- Robust SOP should be there.
Source: IE
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