Account Aggregators Await A UPI-Like Moment

A few months after account aggregators were officially launched in India, backed by India's largest banks, adoption is picking up but slowly.

Account aggregators, registered as non-banking finance companies, will enable financial data sharing from "Financial Information Providers" with "Financial Information Users", with due customer consent.

Six banks, which include HDFC Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd., Federal Bank Ltd., and IDFC First Bank Ltd., have linked to the account aggregator network. Six non-bank lenders have also gone live. Four companies are now offering account aggregator services to customers.

But have consumers started to use it?

According to Sahamati, a not-for-profit supporting the account aggregator ecosystem, about 78,000 accounts have already been linked to account aggregators. 65,000 consent requests have been fulfilled as of the first week of January 2022.

Usage will rise when more financial information providers join the ecosystem, said BG Mahesh, co-founder and chief executive officer of Sahamati. "We should expect all the large banks (including PSUs) to have rolled out multiple products using account aggregation this year," he said.

FIPs are institutions that oversee user data. Typically, these are the banks, mutual funds, pension funds, and NBFCs.

"Once a sizable number of FIPs are available, we can address financial inclusion in a big way," BG Mahesh told BloombergQuint over email.

The number of accounts linked to aggregators is a small fraction of those that exist across the sector. But it is early days yet. Initial technical hiccups need to be addressed and use cases need to be expanded.

"We're still in the early days, and use cases are limited. There's little reason for a user to sign-up with an aggregator," said Sameer Shetty, head, digital business and transformation, Axis Bank. Banks are also yet to start informing customers.

Axis Bank is currently offering only small ticket personal or auto loans using the account aggregator process, where they access a borrower's financial information via an account aggregator to make a decision on the loan.

Other banks too are focusing on small ticket lending initially, said Vikram Pandya, fintech director at SP Jain School of Global Management. To show income proof or reliability as a borrower, the user can sign-up with an aggregator and simply link their bank account, he explained.

The process can help a consumer link multiple bank accounts through mobile number, PAN, customer ID, or email. While borrowing, the aggregator asks for the user's consent to share FIP data with the FIU. It is as easy as entering a PIN to authorise the hand-shake.

Large public sector banks are also still to come on board, Pandya said. Once they do, use cases in rural and semi-urban areas will emerge.

In the future, account aggregation could also include GST, income tax filings, profit and loss statements, provident fund details, and much more. "The future use-cases are abundant, and personal finance will get the maximum push. This is also why wealth management companies are eager to get started with aggregation. With an abundance of data out there, they're well poised to offer automated but tailored solutions to users," Pandya said.

At present, early technical glitches are being faced, which need to be resolved.

Harshvardhan Lunia, chief executive officer of Lendingkart, said the system still needs to stabilise. "We often get errors like blank datasets or other mismatches. These gaps require rigorous testing and accuracy increases as we work with other FIPs, AAs, and FIUs," he said.

As part of the technical process, service providers must embed the aggregator's APIs or application programming interface into their work flow so that lenders can request borrower data. The data received from a borrower’s FIP is in a machine-readable format that can be quickly processed by the lender’s underwriting model.

Anurag Sinha, chief executive of OneScore, which works with credit data, said interoperability is a priority, along with security and privacy. However, achieving all of it without any lapse will require at least a year, he said.

According to Sinha, the open credit enablement network, a set of standards that enable collaboration and partnerships between lenders and digital platforms, will eventually come together with the account aggregator network to achieved the desired outcome — easier access to financial services.

"OCEN helps democratise credit data and the ability to offer credit services. It's the core data structure on which account aggregation is visioned," he said.

Lenders and account aggregators will also have to work harder to improve visibility.

The industry would require investment in marketing and other informational campaigns, which help reduce the learning curve and encourage adoption, said Axis Bank's Shetty. "UPI became a success when all the stakeholders started actively promoting it, including banks and payments companies."

CAMS, FinVu, NADL, and Onemoney have released their client-facing apps. Four others have received in-principle approval, including NSDL and PhonePe.

"UPI adoption, in the beginning, was lukewarm and only picked up steam after demonetisation. Since then, the transfer protocol has clocked exponential growth, and a similar momentum can be expected for aggregation as well," Lendingkart's Lunia said.