Benefits of Account Aggregator Network – UPSC GS3

Complementing the PMJDY, India unveiled the account aggregator (AA) network to overcome the challenges of access to micro-credit for individuals and micro, small and medium enterprises (MSMEs)

The AA network along with Pradhan Mantri Jan Dhan Yojna (PMJDY) would help India formalize credit and boost economic growth in the post-covid era.

It is a paradigm shift from physical collateral to information collateral.

It will unlock access to affordable credit in a streamlined and trustworthy way.

It will reduce the transaction cost and time taken to sanction loans.

It will make lower-sized loans more feasible for banks, and empower them to provide personalized loans and more innovative financial products.

It requires the individual’s permission to share data with an FIU.

The consent method is designed on the principles of Data Empowerment and Protection Architecture (DEPA), a policy proposed by Niti Aayog.

The data shared on the AA network is end-to-end encrypted. It is encrypted by the sender and can be decrypted only by the recipient.

AAs are not allowed to store, process, and sell the customer’s data.

These design principles ensure that ownership of the data lies with individuals and is not monetized. So, no conflict of interest arises when data is shared across the AA platform.

There is a need to expand the adoption of the AA platform in India.

AAs should focus on marketing and create awareness of the services they provide.

Process to onboard other financial information providers (FIPs), like the goods and services tax network (GSTN), insurance companies, National Pension System, etc., needs to be fast-tracked. As of now, only 8 banks have joined the network.