India embrace “Data Empowerment Architecture” with Account Aggregator

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He was the architect of Aadhaar – a biometric identification database of 1.3 Billion Indians that was put together in just over a couple of years. Nandan Nilekani, the co-founder of Infosys, is now back in the headlines discussing India’s “Account Aggregator”.

An open banking-isque concept, Account Aggregators (AA) would consolidate financial information on an individual or a business and share it with a third party.

For instance, data from a farmer topping up his mobile, could be used to offer him/her credit. Imagine the impact if transaction data on 1.3 Billion customers and 11 Million businesses could be brought together.

It was conceived by a panel of four regulators namely,

  • The Reserve Bank of India (RBI)
  • Securities and Exchanges Board of India (SEBI),
  • Insurance Regulatory and Development Agency (IRDA) and
  • Provident Fund Regulatory and Development Agency (PFRDA)

Nandan Nilekani hailed the initiative as he said it would drive financial inclusion at a large scale.

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The rise of Financial Inclusion in India is evident as per the picture above. From 63% in 2016 of the population to 81% in 2018 – that is 235 Million people in 2 years. If Aadhaar was the first step to offering basic banking services to the rural parts of India, AA could take it one step further.

AA could lead to several Fintech use cases including lending, wealth management and financial management, as data that was previously held in silos is now being brought together.

NO – this is not a China like model where government and private sector services providers can have a free ride over customer’s data. Users of AA can decide how their data should be used and for how long. From the point of consent their data will be shared based on programmed controls.

“This is about empowering individuals to have access to their own data – at scale. That’s really the power of the idea.” – Nandan Nilekani

Gone are the days where banks required borrowers to have assets before they lent to them. Today banks only need their data (for a brief period) to make credit decisions. Nandan calls it a “Data Empowerment Architecture”, which is positive way of approaching data privacy.

However, there are several challenges to getting it right. I see the consent process as a weak link. Most Indian consumers are still learning to use smart phones. Asking them to understand the T&Cs of data privacy is stretching it.

Data security is another challenge. That concern remains even for Aadhaar. Until there are serious measures taken to address data security, there is always a risk of data loss. The average Indian consumer, I think, may not pay too much attention to this issue. However, the regulators and the government should.

The other concern is of using existing data to make credit decisions. Existing data already has a lot of biases – and feeding this into credit decision engines equipped with machine learning is dangerous. The machine will also learn to make biased decisions.

Controls are required at every step of the process to ensure this data ecosystem is used in the right way for the right processes. Without that, data could be used towards the next “Great Hack”.

(If you haven’t watched the “The Great Hack” on Netflix – please do. It is pretty good).

Overall, another step in the right direction for India. One building block with Aadhaar, and another one with the Account Aggregator. The country is starting to become a case study for financial inclusion at scale!


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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