Tag: FIP

The Reserve Bank of India last week launched the Account Aggregator (AA) system, which according to industry experts, will be a game changer.

The network is a collection of user data, and has a three-tier structure – FIP, FIU and consumer.

A Financial Information Provider (FIP) will hold customers’ data, and it can be a bank, a non banking financial company, mutual fund, insurance repository or pension fund repository. Then, a Financial Information User (FIU) will consumes the data from an FIP to provide various services to the consumer. The FIU is the lending bank that wants access to the customer’s or the borrower’s data to determine if the borrower qualifies for a loan. Banks, here, will play a dual role – as an FIP and FIU.

The system will not support transactions by customers, but will ensure appropriate mechanisms for customer identification.

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.

Here are top 5 things the network can do –

1. The network can help bridge the gap between the physical collateral required for approving a loan. For instance, if a customer wants to avail an MSME loan, they can provide ‘secure data sharing via AA’, which can quantified as an information collateral or data on future MSME income. Information collateral, with the help of AA, can be used to access a small formal loan. HDFC Bank and Axis Bank have been using AA for auto loans, LendingKart for MSME loans, and IndusInd Bank for personal finance management.

2. With consent from customers, all financial institutions in the network can share their collection of user data in the system, which can be accessed across institutions. The AA will share information only with the customer to whom it relates or any other financial information user as authorised by the customer.

3. Customers will not need to do their Know Your Customer (KYC) formalities for taking loans, getting insurance or investing in mutual funds, if everything is linked to the AA.

4. If customers link their information with the AA, they can share financial information of various accounts such as banks deposits, equity, mutual fund and pension funds to any entity requiring access to such information.

5. A system like AA can help customers access their personal data, especially amid COVID-19. The network will help in reducing fraud associated with physical data by introducing secure digital signatures and end-to-end encryption for data sharing.