Finance Minister Nirmala Sitharaman last month instructed all public sector banks (PSBs) to get on board the account aggregator system (AA) by July end. All 12 PSBs are now reportedly live on the AA system.
The project dubbed Sahamati, a member-driven industry alliance for AA, tweeted that “1.1 Billion accounts, including all major public and private bank accounts, are now live on India's account aggregator.
Sahamati described the system as “A Seminal moment for the world's largest Open Banking ecosystem! This will unleash India's next wave of financial inclusion and fintech innovation!”
A recent survey by fintech company, FinBox, which signed up to the AA platform, surveyed over 3.8 lakh people who are are already on the AA platform. Some insightful data and people’s behaviour in general were found as a result of this survey.
According to the report titled ‘AA Case Study’, the AA framework was launched in September 2021 after almost six years of research and development.
The AA system offers data privacy, advanced fraud detection capability, ease of access and integration, and standardised financial information flow.
Some industry stakeholders have compared the AA launch to the UPI moment. The Securities and Exchange Board of India (Sebi) also has expressed its desire to join the AA framework.
UPI has transformed India’s digital payments ecosystem, making it the world’s biggest instant payment processing country.
Adoption Insights
As per Sahamati data, about 170 financial information users (FIUs) and financial information providers (FIPs) are at various stages of going live on the AA framework ecosystem. The list includes banks and NBFCs.
The Finbox report also shed light on the number of users who joined the AA platform as of the first week of July. As can be seen from the graph below about 0.97 million people have joined the AA platform.
The report also contains consumer feedback compiled by FinBox. Consumers were asked to choose between sharing financial data, like bank statements with manual uploads, via net banking credentials, or through the account aggregator.
Seventy-one per cent of the consumers said that they are open to sharing their financial data like bank statements to AA. Also, 14 per cent of consumers said that they were willing to provide their financial data through net banking and 15 per cent said they were willing to choose the manual upload option.
Many consumers (15+14= 29 per cent) preferred manual uploads and net-banking and part of this trend can be attributed to “the fact that customers are wary of sharing their credentials to sensitive financial information. Net banking has been part of the application process of our original BankConnect product,” the report noted.
Besides, FinBox noticed that “a number of customers have always been reluctant to share their credentials, indicating hesitation to adopt a more technically advanced method.”
Fraud Prevention
This part of the report deals with the fraudulent upload of bank statements to secure a loan.
Nageen Kommu, CEO and founder of Digitap, a tech company providing AI-driven solutions for the banking industry, said that fraud cases can be lowered by using the account aggregator framework, “since the banks live on the platform can get verified financial data of the customer with their consent from other AA participants where the customer has an account.”
The report found out that the fraud instances were 11.04 per cent preceding the AA integration and now post AA integration it is 6.4 per cent.
Another report by the Delhi-based market research company, Localcircles.com, found that 42% of people who participated in the study experienced financial fraud in the last three years, and of these, only about 17 per cent got their money back. A total of 11,000 users were surveyed in the study.
Fraudulently obtaining loans, fraudsters duping people of their money, fraudsters using deep fakes to scam, and other financial cyber crimes are set to rise this year, as per a Finextra report.
Conversion Insights
The FinBox report also noted that out of all modes of sharing bank statements for getting a loan, the account aggregator mode saw the highest conversion rate. The report said that 90.3 per cent of people who used the AA platform went on to finish their loan applications.
People using the manual PDF upload method saw a 56.8 per cent conversion rate and net-banking at 49.8 per cent.
“Account aggregator takes the lead in conversions because, unlike the other modes, it doesn’t interrupt the journey by requesting the user to take a certain action,” noted the report.
Amit Das, CEO and co-founder, Think360.ai, a data science company, said, "The maturity and adoption numbers are extremely nuanced at this stage. It is the most potent regulator led innovation in recent years. However, we must remember these are early stages, with high customer and ecosystem (FIUs, especially) interest. The AA framework now has only over a million accounts created (out of 1.1 billion+ accounts available). These are promising early signs."
