As the saying goes, "data is king" since it can be found everywhere and be used for anything. Today, we generate ever-larger amounts of data, but in the past, we required a powerful computer only to produce and store a few megabytes.
Most market differentiators across sectors are determined by how well they use data from various sources. Decisions need to be data-driven in the financial services industry in particular because of customers' demands for speed, safety, and convenience. The account aggregation structure is useful for this purpose.
So, before we go any further into our account aggregator architecture, let's begin with account aggregation.
The role of account aggregators in the financial system
The term "account aggregator framework" is used to describe the practice of compiling a person's financial information from many accounts into a single location. It's a kind of financial data aggregation that includes things like cash flow and investments in addition to the more common credit rating assets like credit cards and loans. Many other types of transactions and documents (such as bank statements, receipts, tax returns, and stock investment statements) are used as data points.
To what extent does the system of account aggregators help close the gap in financial education?
More thorough familiarity with the inner workings of the conventional financial system is required for a full grasp of this concept. In fact, people in India have access to powerful options via the country's formal financial structures. There are tens of millions of people in the United States who do not have bank accounts, but several initiatives have been designed and implemented to change that.
There is still a substantial population of unbanked and underserved people who need financial services. Customers who are already part of the system make for simple targets for financial products and services since they have established identities and a track record of responsible money management in the form of savings, checking, and investment accounts.
In spite of this, reaching historically underserved customers in a sustainable way remains a formidable challenge. The lack of easily accessible and inexpensive financial data is a major barrier to the development of a fully functional financial services ecosystem.
This is precisely the goal of the account aggregator framework. The improved effectiveness of financial services is one of the goals of this framework, which is designed to drive financial inclusion in the nation. With more accessible consumer financial information, lenders will have an easier time underwriting new-to-credit and underbanked clients, which will have a favourable effect on credit distribution.
By using standardised data sources, the account aggregator architecture can determine the creditworthiness and payback capacity of such debtors. It will be different from just looking at bank statements to determine a new borrower's income level.
The credit risk assessment will be simplified, made more widely available, and more cost-efficient, according to FIUs' analysis of the account aggregator architecture. New client use cases will surface as more people begin participating in this ecosystem. This approach will help people and micro, small, and medium-sized enterprises (MSMEs) that are searching for loans to grow their businesses.