Share and care
As banks, insurers, pension and tax authorities agree to share consumer data with fintech firms, data safety has to be of paramount importance.
Information is strength, data give muscle. Usage of data to deepen and broaden financial markets in India got a big boost with banks, insurance companies, tax bosses and pension fund authorities agreeing to share consumer data with lenders and fintech companies. The Account Aggregator system involves three groups of players. The first set consists of banks, insurance companies, pension fund authorities and tax bosses who are sitting on mountains of data that give granular information on income, saving, investment and expenditure patterns of millions and millions of consumers. The second set comprises lending companies and fintech entities that are seeking to expand their market with the use of this incredible amount of information. The third set that sits in the middle of the to data generator and data user categories is formed by data aggregators who would ensure smooth and seamless flow of information between the generator and the user.
This is a landmark decision that would lead to the broadening and deepening of the financial services industry in a manner probably not recorded elsewhere. Experts have already said the system packs the transformational potential of the Unified Payments System. There is little doubt that with the new-found wealth of information, lenders and fintech companies can better analyse and target both retail borrowers and businesses more effectively. Already eight banks representing almost 40% of the bank accounts in India have joined the system.
However, amid this optimism and euphoria, the regulators must not forget the paramount importance of data safety. The issue of securing privacy and safety of data and consumer information has become a headache for all modern societies. As fintech and digital payments gained ground, it became incumbent upon the government and the central bank to balance the massive expansion with safeguarding data and raising the efficiency of transaction in the system. The central bank would be saddled with the same responsibility this time too.