Account Aggregators: 5 reasons to be bullish and a couple to not be
By Leandra Monteiro
With regards to the implementation of Account Aggregator, Amit Das, CEO and Co-founder of Think360.ai, an alternate data-based credit assessment platform details how this move will impact the lending decision-making process and data collection for both lenders and borrowers making it more inclusive. Below are five reasons to be bullish and reasons not to be:
- The account aggregator system creates the framework for a very scalable data gateway that enables regulated entities to get verified data. By design, it is digital-first, data first, and scalable. Thus, as it is being said now, AA can do for data what UPI did for payments.
- The purpose, duration of the data, and overall adherence to data privacy norms are great factors that ensure that customers are always prioritized first.
- It can potentially compress the TAT and hence, reduce decision-making costs (such as loan approval processes) by days and weeks. Most SME-focused lenders have an end-to-end TAT target of 20 days+ for disbursals. With the improved access to data, the AA framework will ensure better, faster and more confident underwriting calls.
- Currently, a significant part of the underwriting effort is spent in ensuring that the documents and bank statements collected during the process have not been tampered with. The AA framework helps in overcoming that with the authenticated information obtained directly from the Financial Information Provider (FIP) and sent to the Financial Information Users (FIUs).
- A second, but equally important operational issue is the multiple iterations it takes for all the required data to come through. The account aggregators will hopefully make it faster to move between iterations involving multiple parties.
On the other hand,
- The UIUX interventions of AA based processes are yet to be seen. For years, credentials-driven data collection processes have had significant drop-offs. It will be interesting to see if a tokenized method of data sharing is perceived as lower-friction by customers.
- In spite of customer education, people are scared of what they cannot control or what can come across as information risk. While UPI is a transaction with a potential dispute resolution facility, which can help one recover their money, data once lost cannot be recovered. We have not yet heard enough about the security aspects of the AA framework.
- Lastly, the FIPs have to make significant investments to make data available for every FIU. For years, we have had a feudal system around data ownership. Every institution believes that the data they have is a secret source of market differentiation. By opening up data thus, are we threatening the incumbents too much?
While the FIP-FIU TSPs are providing the FIP-FIU modules, there are various other services that are required to make full use of the data received from the Account Aggregator digital public rails.