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Next Up: Account Aggregators

Account Aggregators will find significant acceptance within the funding community. The fees are likely to be affordable, the market breadth is massive, there are no geographical restrictions, and the business itself is an annuitant of sorts

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"Goodbye Foodtech, Hello Fintech" seems to be the new mantra that the funding community is unitedly and unabashedly chanting. According to data published by research firm VCEdge, the year 2016 has seen over 1,300 Crores of fresh investments into Indian FinTech companies - ranging from Financial Planning firms and payment aggregators to M-wallets and online marketplaces for loans and insurance products. India ranked second to China in the APAC region in terms of the quantum of FinTech investments mobilized this year.

In a recent watershed development that could spur the next bout of activity in the FinTech space in the coming 12-18 months, the RBI announced a new category of NBFC called "Account Aggregator" with the view of solving a seemingly inconsequential problem that actually has serious ramifications: the problem of "not knowing where your money is"!

If (armed with funds, intellect and imagination) the industry manages to pull this off, it could potentially put an end to the problems of trawling through countless documents, queueing up on phone banking lines and dealing with uncertainty about where exactly your money is today, and how it's faring.

Using a single window view on an app or a web application, you'll likely be able to soon view what your bank balances are, how much money is in your Fixed Deposits and when they're due to mature, how your stocks, mutual funds & ULIP's are performing, how much of your car or home loan is pending, what your credit card outstanding amount is, what your bonds are worth, when your insurance premiums are due, and most other details related to your personal finances. All for a fee, of course.

The recent RBI circular defines the role of an account aggregator as 'retrieving, collecting, consolidating, organizing and presenting' financial information pertaining to the customer. Prospective account aggregators need to have a 'net owned fund' value of at least Rs. 2 Crores on the date of application. Besides the same, the management must be deemed fit and the IT system plan must be 'robust' in nature. "The Business of an Account Aggregator will be entirely IT driven. The Account Aggregator shall adopt the required IT framework and interfaces to ensure secure data flows", the circular stipulates.

Needless to say - the customer's explicit consent will be required for the process to be executed; which means that Account Aggregators cannot retrieve your information unless you provide them with a signed consent to do so. In addition, the circular stipulates that the Account Aggregator cannot engage in transactional execution: a wise move on RBI's behalf given the somewhat unsavoury sales environment in India when it comes to the distribution of financial products. The last thing you'd want is for your account aggregator to discover that you've not been sold Life Insurance as yet, and try to saddle you with a poor investment thereafter! Client enablement and value add would go straight out of the window.

In my opinion, Account Aggregators will find significant acceptance within the funding community. The fees are likely to be affordable, the market breadth is massive, there are no geographical restrictions, and the business itself is an annuitant of sorts: if the customer experience is good, there's no reason why annual renewals won't be close to 100 per cent. In a market where many FinTech businesses operate on low to negative unit economics and survive on a steady diet of funding, such a model would be like a breath of fresh air.

The value add from the client standpoint is likely to be meaningful too. Karl Pearson sure knew his stuff when he famously declared: "That which is measured, improves... That which is measured and reported, improves exponentially". Having a one-stop tracking point for all your finances would give you a lot more control over your money. In addition, it's likely that a number of these applications will strap on basic financial planning capabilities that will collate your data and present action points for you to take, as this falls outside the purview of 'execution' (there's nothing in the circular barring 'evaluation').

Imagine a mobile alert that pops up when your equity allocation exceeds your stipulated ceiling as per your risk profile, when your debt to income ratio is at risk of crossing over into dangerous terrain, when your bank balance in one account is too low for an impending EMI (advising you to transfer funds thereafter), or when your credit card payment due date is about to pass un-actioned. You get the gist, right?

Launch and execution challenges notwithstanding (technological, legal and what not), the successful introduction of Account Aggregators will mark a landmark development for the Indian FinServ community as a whole. Not very often does one come across the marriage of a potentially valuable customer proposition with a viable and scalable business proposition. I'm quite certain there are enterprising FInTech executives rubbing their hands in delight. One can hardly wait!


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