WHAT IS AN ACCOUNT AGGREGATOR (AA) NETWORK?
The AA network was introduced in 2021 to bring open banking to India. Traditionally, our financial data such as bank statements, tax records, investment data and other information remain fragmented across financial institutions or government agencies. The AA network aims to integrate them and serve as a digital platform allowing us to securely share our financial information across institutions. This simplifies processes such as loan applications and seeking financial advice.
Let’s say you want to apply for a loan from a bank. This would normally mean gathering stacks of documents from individual sources and spending hours explaining your financial history to the lender. Instead of going through this hassle, the AA network simplifies this process. You can digitally grant permission for the bank to access your other bank statements, investment records, income tax records and much more, directly from your existing banks, government agencies and credit rating providers. All this, just with a single click through OTP-based authentication on your mobile.
Remember, individuals can choose to share the details or not. Thus, it is completely voluntary at the choice of the individual.
THE STORY SO FAR
On the implementation front, the AA network, initially joined by major banks, has now expanded to include numerous non-banking financial companies, asset management companies, insurance companies, and pension funds. More than 1.1 billion accounts are now eligible to register and become part of the AA network. As of December 2022, there were already 94 financial institutions as users in the AA network. However, the full potential is yet to be realized. Businesses too, could not fully leverage the benefits of this concept.
HOW DO BUSINESS STAND TO BENEFIT?
Things are set to change with the GSTN coming on board as a financial information provider within the AA framework. Small businesses will be now able to authorize lenders to also access their tax records through the streamlined process. GSTN brings along with it, a strong base of around 1.5 million taxpayers and their tax data to the AA framework.
The integration of the GSTN with the AA network simplifies the lending journey for businesses seeking credit. Instead of a lengthy and manual process, businesses can now enjoy a smooth and digitized experience, as lenders can directly download their GST details.
More importantly, AA will be a game-changer for the 61% MSMEs in India without access to formal credit due to lack of sufficient collateral. It provides comprehensive data sources to showcase their creditworthiness, enabling these small businesses to access credit. Additionally, it empowers lenders to innovate with a holistic view of businesses’ financial health on a single platform, reducing fraud and loan processing time. Thus, the AA network is a tool for the democratization of credit to millions of small business owners.
However, robust measures must be implemented by the RBI and the government to safeguard data privacy. Also, maintaining the current practice, financial information sharing should remain entirely voluntary. Furthermore, addressing other minor issues such as authentication of data sharing for joint bank accounts is crucial to encourage widespread usage.
