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Consent-Based Digital Financial Info Addresses All Potential Risks Associated With Paper-Based Info

Author: Kumar Shankar Roy/Wednesday, April 8, 2020/Categories: The Finapolis Conversation

Consent-Based Digital Financial Info Addresses All Potential Risks Associated With Paper-Based Info

The Reserve Bank of India (RBI) has stipulated the framework for the registration of a new class of NBFCs for Account Aggregator (AA) services to aggregate customers’ financial asset information and deliver reporting services. Account Aggregator is a path breaking initiative of RBI to drive financial inclusion and digitalization of citizens’ experience in seeking and managing their personal financial information. Financial institutions such as banks, insurers, lending companies will benefit from using the platform for customers’ data. CAMS FinServ has received RBI license for Account Aggregator service recently. In this week’s Finapolis Conversation, Kumar Shankar Roy talks with NR Sudarshan, Vice President, CAMS on the mechanism through which a customer’s financial information is collated, how safe is the data, what are the advantages of such financial information sharing, and much more. Read on.

Explain how the account aggregator service works from a layman perspective?

Account Aggregators is the GOI initiative envisioned to increase financial inclusion and digitalize citizens’ experience in seeking and routing of their personal financial information. The Reserve Bank of India has stipulated the framework for Account Aggregator (AA) services to aggregate customers’ financial asset information and deliver reporting services. Account Aggregators will facilitate an aggregated view of all the financial information of a customer collected from various financial institutions such as banks, mutual funds, insurance companies housing loan companies and lenders where the customer may have a relationship. The financial information collected from these institutions, namely Financial Information Providers (FIP) is shared with Financial Information Users (FIU) such as lending companies, wealth managers, banks, etc., with the explicit consent of the customer.

This is expected to change the way people in India share their financial data, with security and consent, for meeting their various needs.

What will be the advantage for customers if financial information is allowed to be shared? Also, what will be the disadvantages if the consent for sharing financial information is not given?

There are several short comings in the current model of sharing of financial information, which is physical paper mode statements and reports. The risks associated with paper based information sharing are aplenty. Controls at number of points the paper travels through, unauthorised copies being taken, potential tampering of information provided by the customers are a few of them. Aggregating information on various holdings can be a time consuming and tedious process for the customer. Speed of information required by financial institutions is another challenge.

In contrast, consent based digital financial information addresses all potential risks associated with paper based information. A very robust, encrypted mode of information sharing only to the authorized recipient brings security and reliability, eliminating multiple hands-off in the process. With on-the-fly information sharing speed is also assured.

Data is generated every now and then. How will the consent be taken from customers? What will be the frequency of seeking consent?

The customer is the only one who has the right to authorize sharing of financial information sharing via a consent that binds the FIP and FIU. The consent is independently verified and approved by these entities through OTPs sent to the customer. Also, the consent is highly programmable by means of setting a clearly defined ‘Start Data and End Date.’ Consents are also pre-programmable with duration for a Financial Institution sharing the information and the customer has the flexibility to stop, pause or completely revoke the consent.

We are aware of the credit bureaus and each one of them gives a separate score. Will account aggregator (AA) services to aggregate customers’ financial asset information and deliver reporting services give any score specific to each customer?

AA is not equal to Credit Bureaus nor it’s an alternate for KYC verification. As explained above, AAs are the facilitators to aggregate the customer’s financial information. AAs have the capability to provide a templated view of the customers ‘consented’ financial information in his screen and provide a report that could be used in the customer’s desk top / mobile screens. AAs are data blind, meaning that there is no provision for AAs to store any of the customers’ financial information and do any further customization with it. The moment the customer views the information in his screen / downloads it, the data from AA will get purged.

Who are Financial Information Providers (FIP)? What will they share exactly?

Typically all the mutual funds, banks (all products offered by them), stock brokers, pension managers, insurance companies will be part of the FIPs. All products offered by them would be available with a specific set of data information that will be available for sharing.

Who is Financial Information User (FIU)? 

Banks, NBFCs, Wealth Advisers, RIAs, Insurers would largely be the FIUs. Let’s take a use case of a NBFC as FIU where customer’s net worth statement is a requirement. The customer can provide the consent on the NBFC’s website which will initiate the AA to fetch and aggregate the financial information of the customer from all the FIPs. After due authentications, the FIPs push the data to AA which is consolidated and shared with the NBFC.

From whom will the customer seek the aggregated data? Will the customer be required to pay any fees and charges for doing so?

Typically, all the above FIPs will be the suppliers of information that the customer might seek. As of now, it is not envisaged for the customer to be directly paying the AA to use the services.

What are the data privacy concerns and challenges in this model? How is CAMS FinServ addressing them?

There need not be any concerns around it as the entire data sharing mechanism is completely systemic, straight from the holder of the information and shared via a strong encrypted mode. Also, the consents are driven by independent authorization via OTPs sent to the customers by the FIPs. As mentioned earlier, data is not stored by CAMS FinServ.

To build the proper systems, how much money has been invested by CAMS FinServ? When will you commence operations?

Our in-house technology team has developed the CAMS FinServ platform. We propose to commence operations by May 2020 and have started engaging with Financial Institutions.

What is the business model of AA? How will you earn revenues to support your mission?

We will be charging the FIUs on an agreeable commercial basis.

How will your organization handle customer grievances?

CAMS is known for its customer centricity serving customers of the mutual fund industry for over two decades. RBI while granting license to CAMS FinServ, has ensured that adequate Customer Redressal Mechanisms are in place and also mandated the policies to be updated and made available to public in our portal itself. You will find our policy related to this on our website https://www.camsfinserv.com Citizens Charter page.

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