Small Account Aggregators trip on a big bank issue in new twist
NBFC-Account Aggregator (NBFC-AA) ecosystem, which was designed to enable an open banking framework, is facing stiff challenges around scale up for small players, according to multiple industry insiders in the know.
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“While the first batch of account aggregators has managed to tie up with large financial data providers like banks (FIPs), the ones who got licences subsequently have been facing challenges to partner with major lenders,” said a top executive at an NBFC-AA firm on the condition of anonymity.
On Friday, digital payments major PhonePe said it surrendered its AA licence, given its failure to scale up partnership with large banks. The Walmart-backed firm had received the licence in mid-2023.
The NBFC-AA ecosystem works in a manner that banks, insurance companies and asset management firms, who have large client bases, provide financial data about their customers so that smaller lenders and new-age fintechs can underwrite them for instant credit products. An AA needs to build pipelines with information providers (FIPs) on one side and information users (FIUs) on the other.
“The top 10 banks in the country have 90% of the deposit base; for any AA to have a viable business model they at least need all these 10 bank partnerships,” said the executive. Given these partnerships require a bunch of integrations, information security checks and do not provide much financial upside for the banks, they are not ready to partner with each of the AAs, he added.
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