Exploring the Future of Indian Fintech: Insights into the RBI’s Account Aggregator Framework
The podcast, hosted by Probir Roy Chowdhury and Yajas Setlur of JSA and featuring Vinay Kesari of Setu, focuses on the Reserve Bank of India’s account aggregator framework.
The Account Aggregator Framework and India’s Digital Public Infrastructure
Kesari explains the role of an account aggregator (AA) as a consent manager and licensed financial data intermediary. The AA framework, part of India’s Data Empowerment and Protection Architecture (DEPA), mediates user financial data transfer between financial institutions and service providers, ensuring user consent. This framework, unique globally, takes a techno-legal approach to data sharing, offering secure, consented, and legal data transfer.
The AA framework, established under the Reserve Bank of India (RBI)’s 2016 Non-Banking Financial Company - Account Aggregator Master Directions, is part of India’s broader push for digital public infrastructure, which includes the Unified Payments Interface and Open Network for Digital Commerce. It aims for an open, interoperable infrastructure with real market competition. This approach prevents dominance by a single entity, ensuring a level playing field and fostering innovation and user-friendly financial technology solutions.
Kesari discusses the AA framework’s practicality for SMEs and consumers, facilitating easier and more secure access to credit by providing lenders with trustworthy data. He also covers the challenges for entities becoming AAs, emphasising the strict RBI regulations and the need for a separate entity solely for AA operations, adhering to both technical and legal compliance.
“The consent artifact is a simple file that contains all of the details related to the consent: purpose, duration, who is providing, using and processing the data.”
The podcast delves into the intricacies of the AA framework’s consent mechanism. The consent artifact, a key innovation, is a techno-legal solution ensuring secured, auditable consent. This artifact contains detailed consent records, offering a reliable audit trail for dispute resolution and data protection compliance.
The Digital Personal Data Protection Act and the Future of Fintech in India
Discussing the impending Digital Personal Data Protection Act (DPDPA), Kesari sees it complementing the AA framework, offering a standardised approach to data sharing and protection. The AA model, potentially extendable to other data types, aligns with the DPDPA’s consent manager concept. This alignment could ease compliance burdens for companies and foster responsible fintech innovation.
The conversation shifts to the evolution of the fintech landscape in India. Kesari observes a convergence of technology and financial services, with fintech increasingly embracing regulation. This trend reflects a broader recognition of fintech’s role in addressing India’s financial challenges. The regulatory environment, he suggests, is becoming more conducive to fintech growth, balancing innovation with responsible financial practices.
The podcast concludes with reflections on the future of fintech in India, anticipating more self-regulation and a co-operative approach between industry and regulators. This evolving landscape, marked by the blurring lines between technology and traditional financial services, presents opportunities for innovative, regulated financial solutions.
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