Tag: Account Aggregators

India last week launched the account aggregator (AA) system to consolidate financial data of users in one place. The system will extend credit services to them based on that information, and will be based on Unified Payments Interface (UPI) payment theme.

As of now, eight of India’s major banks – State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank, and Federal Bank have joined the account aggregator network.

And, of these, four – HDFC Bank, ICICI Bank, Axis Bank and IndusInd Bank – have gone live. FinTechs are also seeking to join the network, with Fi being among the first.

The AA system will help reduce the need for customers to wait in long queues, use internet banking portals or share passwords.

Here is a recap of ETBFSI’s report of last year in October, which noted that AA systems have become extremely popular over the recent years with the rise of services like Mint and Personal Capital.

What is an account aggregator?
Account aggregation or financial data aggregation is a process whereby data from several or all of an individual’s or household’s financial accounts are collected in one place. In terms of online banking, the user may be provided with a service that curates a home page on which account holders can see information from all of their checking, savings, CDs, and brokerage accounts. Personal finance software, apps, and online services like Quicken or Mint provide such account aggregation services, and are thus, called account aggregators.

How does an account aggregation work?
Account aggregation usually occurs only within a single financial institution but certain assets held by the user outside a financial institution may be included if the account holder has agreed to it. Personal finance services offer customers the option to ‘aggregate’ data from all of their savings, checking, brokerage accounts, as well as other financial assets across all institutions that the users have their accounts with. These services usually require them to provide their account credentials (username and password) if they wish to avail the facility. Using the given information, the downloads data from each account to include in the aggregation. Often, account aggregation software is allowed only to access balance information and transaction records. Furthermore, for security reasons, many aggregation services do not permit users to make transactions from within the aggregate portal.
In addition to the mentioned services, some softwares, often used by professional financial advisers on behalf of their clients, bring together additional net-worth data, such as recent home-value estimates, categorize cash inflows and outflows, and debt liabilities in the financial picture.

Benefits of account aggregation

• Overview: The main use is getting a general overview of the company or individual’s financial situation.It’s the “tidy desk” that keeps you updated and in control.
• Planning: Account aggregation can be used as a financial management and planning tool by providing streamlined account access for account holders, especially for families who have multiple financial goals.
• Usage patterns: It helps keep a track of our own patterns. If used to track a customers’ patterns, it detects non-payments, quickly and offers personalised offers that grab their attention and generate customer loyalty.
• Real-time: It is constantly updated, offering new on-demand updates, which is humanly impossible to do at the quick speed that aggregator does.
• Process automation: It’s easy to forget to input data (a new transfer), to make a mistake when making an account balance, etc. Process automation offered by this kind of APIs minimises errors and oversights that anyone could make, simplifying financial control.

Problems faced by the users

• Mechanical Difficulties: Since many institutions are not aggregator-friendly, it is forced to robotically “scrape” the information. This involves a computer program visiting a bank’s website, logging in using a client’s credentials and then reading through code to take out information like account balances automatically. The scraping process is quickly overwhelming the servers of popular banks, creating a website slowdown.
• Prone to hacking: Banks have struggled with identifying the difference between account aggregators logging into an account several times and often confuse it with hackers to give the latter an easy pass. This may even hurt client relationships as consumers may face account lockouts if there have been too many failed attempts to log in.
• Tussle between banks and aggregators: Some large banks have completely banned account aggregators from accessing their website by blocking the IP address of an account aggregator’s computer program. Consumers are caught in the middle of this tussle as they may see inaccurate data or may not be able to access their financial data at all.

The need of the hour is to develop an application programming interface (API) designed to handle data requests by the account aggregators. By routing account aggregation requests to an API rather than a website, slowdowns and the risk of exposing login credentials can be prevented.

Account aggregators in India
Indian banks are also gearing up to launch account aggregators. Axis Bank, Bajaj Finserv, ICICI Bank, IDFC FIRST Bank, HDFC Bank, Indusind Bank, Kotak Mahindra Bank and State Bank of India have been working to adopt the account aggregator (AA) framework. The first account aggregator to receive their license in India is Onemoney. Not far behind, Cams Finserv, FinSec AA Solutions and Cookiejar Technologies have received operating licences. An account aggregator ecosystem, as envisaged by the RBI for India, would be a platform for financial services companies to reach out to the consumer and seek consent for using their personal data to optimise their product offerings.