A new initiative in India will give the country’s more than 560 million internet users a digital account aggregator, which will bring a totally new level of control over their digital financial data.
According to a report in Bloomberg, which broke the news, the initiative is backed by the Reserve Bank of India, and will combine privacy protection with a one-stop access point for financial data. If it works, it could open up a credit market to millions of people across a country in which millions are excluded from banking.
Similar, though far more ambitious than the Open Banking initiative seen in the UK, given India’s colossal scale, the new system will use third parties to help ease the complexity of information sharing.
Banks will offer an account aggregator, licenced by the country’s central bank. When a customer applies for a loan, they will be able to choose to share a rich trove of financial data with providers temporarily. For those unable to provide collateral, such a system could open up alternative streams of information that would attest to a person’s credit-worthiness.
“Small banks can compete in this newly-leveled playing field by giving out sachet loans to businesses which have no assets other than cash flow,” explained BG Mahesh, co-founder of Sahamati, a not-for-profit collective of account aggregators.
Where the story gets interesting is how it differs from the systems extant in very developed markets. In the US, for instance, a tiny number of credit reporting firms – three, to be precise – collect and sell financial data from banks with quite flimsy consent given. Meanwhile, Europe’s GDPR has brought people more rights, but still allows data tracking.
The difference in India stems from a Supreme Court ruling from August 2017 that found privacy to be a “fundamental right” enshrined in the country’s constitution.
A handful of banks, as well as Reliance Group’s Jio Information solutions, are working on systems under a provisional license from the Indian central bank. The challenge in future will be two-fold, both in bringing onboard financial institutions and in encouraging people to use it.
Sourced from Bloomberg, WARC, The Guardian