India leading it way in financial innovation adopts the only third-party independent consent-manager based open banking framework in the world.
8 Indian banks have joined hands to create a system where a person can share their financial data from one bank to the other. With user consent, with just a few clicks, once can transfer his/her account details from one bank to another (say SBI to HDFC) and you can decide how long this data can be accessed. These entities will act as a ‘data bridge’ between banks & FIs.
This could be the ‘UPI moment’ for banking data transfer!!!
But how does this help us?
Why the hype?
Imagine you own a small business, or maybe you work in the unorganised sector. You have a savings account where you deposit some money each month. You make around 2 or 3 payments to pay bills.
You can’t get a loan as easily because you don’t have a credit history.
You have income, but your history as a borrower is missing because you have never taken a loan from a bank or NBFC before.
If you can import your data from your bank, you can show that you have enough cash flow to pay back the loan.
This system will allow a huge amount of people to access loans at affordable rates. The account aggregator ecosystem enables financial services by eliminating paper trails.
Another usage is in the field of Life Insurance!!
Term insurance is generally only offered to those who can offer proof of income.
Hence, this system in-short can help give this proof of income/capability to pay to the mass of Indians who need such financial products.
Ideally, we all own our data.
But most of us can’t access our data or use it.
This aggregator allows us, as customers, to get value from our data.
These digital footprints can help democratise credit and insurance in India. The potential of this system is limitless – lending, insurance, banking, borrowing, etc.
The fact that you can use UPI across all platforms is why it is so revolutionary. Today UPI clocks more than 3 billion transactions each month!
The industry has great hopes for this Account Aggregator system.
Looking forward to a better financial ecosystem!