It could be end of the road of ‘shady’ digital lending apps

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India’s first Account Aggregator (AA) loan was disbursed earlier this month by Lendingkart, based on data from the borrower’s accounts. The data was enabled by Onemoney. Account Aggregators (AA) network is a new financial data sharing system, launched earlier this month by the Centre.  AA gives individuals control over their personal financial data, allowing open banking by giving customers the choice to share their data across institutions in a secure manner.

An account aggregator is an entity that comes under the purview of the Reserve Bank of India (RBI). This entity comes with an NBFC-AA licence as well.

AA helps to democratise data

Onemoney was incidentally the first to get AA licence. Cams Financial Information, Cookiejar Technologies, NSEL Asset Data, Yodlee, Perfios and PhonePe are the others.

“The account aggregator helps to democratise data and ‘sachetise’ financial products so that small-ticket loans, insurance and investment products are widely available…We provide the financial information users with a Software Development Kit, which allows them to seamlessly onboard borrowers onto the account aggregator platform,” The Times of India quoted Krishna Prasad, founder CEO of FinTech Products and Solution, the company that owns Onemoney AA, as saying.

The newspaper also reported that with AA in the lending scene now, digital lending apps can now lend more efficiently as they will have access to bank data. “Shady digital lenders may die a natural death as regulated lenders can now provide the same service efficiently,” it said.

According to a report on AA prepared by Emkay Finance – “MSMEs and new-to-credit borrowers will be among the major beneficiaries of the AA framework as they lack access to formal credit. Using the AA framework, lenders can give credit based on verified data such as GST invoices, bank statements, securities information and other cash flow surrogates.”

What is AA?

Account Aggregators and RBI-regulated entities, which help an individual securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution within the AA network. The most important thing about AA is that no user’s data can be shared without their explicit consent. An individual has the option to choose from various AA.

How to register with AA?

One can register with an AA through their respective apps, such as Finvu, OneMoney, CAMS Finserv, and NADL. Once you register with them, the AA will provide a handle (username) that can be used to give them consent. PhonePe, Yodlee, and Perfios have also received in-principle approval from RBI to launch their own AA apps and are likely to launch soon.