Hi everyone,

Welcome to the 147th edition of The Pattern, a weekly where we dive into the latest from the world of economy, technology and finance. Let’s get started.

How do we grow a forest? We don’t. We start by growing a plant. It begins with a single seed nurturing itand seeing it blossom.

Like the Account Aggregator (AA) framework—a digital infrastructure—carefully planted and nurtured by RBI in 2021, that has matured into a powerful financial data-sharing platform in India's lending ecosystem. It provides greater access to data, which, in turn, expands the potential pool of customers for lenders and fintechs .

Well, the fruits of labour are nothing short of sweet. In just the first half of FY2025, ₹74,500 crores were disbursed via AA, sanctioning roughly 5.47 million loans.

This brings the total number of loans enabled by the AA ecosystem to 9.7 million since its launch, a huge leap from where it began.

According to Sahamati, the top eight lending institutions accounted for ₹46,200 crore, showcasing the widespread adoption and success of AA. This brings to the total disbursements of over ₹1.3 lakh crore, proving that the roots of AA are well supporting their financial landscape.

The prominent players of the AA ecosystem are the digital lenders who are driving the majority of consent requests. Whereas over 65% of total consents are dominated by the NBFCs, as of December 2024.

A barren digital lending landscape

For decades, inefficiencies have been prevalent in underwriting. Borrowers had to submit bundles of documents, including physical salary slips, bank statements, and tax records, which delayed the lending process by weeks.

In 2020, a whopping 63% of customers abandoned their digital bank applications because of complicated and lengthy loan application journey. Meanwhile, lenders struggled with fragmented financial data and heavily relied on traditional credit scoring models.

In a country where access to credit remains a critical growth lever for MSMEs and individuals, a slow and unreliable underwriting process was a bottleneck that needed to be fixed.

Securing the roots of underwriting

Over the years, AA has changed the game by digitising and streamlining the underwriting process. AA enables lenders to access real-time, consent-based financial data from banks, mutual funds, insurance providers, tax authorities and other sources. That too, within minutes.

Because of this multi-source access, lenders get a more holistic view of the borrower's financial health, which helps them to make more informed lending decisions and improve underwriting.

One of the reasons why AA is the need of the hour is because the data is fetched directly from financial institutions, eliminating document tampering and reducing fraud risks. By automating data collection, lenders cut down operational costs and accelerate loan approvals, making credit more accessible.

The promise of AA beyond underwriting

Beyond underwriting, lenders can now monitor real-time cash flows, spot early signs of trouble , and step in before it's too late. The result? Fewer loan defaults and a healthier lending portfolio. AA makes managing money easier as users can see all their financial data in one place, track spending, monitor investments, and get insights tailored to their needs. Wealth managers and advisors, with the help of AA, can offer smarter and more customised investment plans, making wealth building more effortless.

The AA framework also helps financial institutions use multiple AAs, which keeps services running smoothly without interruptions.

Here's why this matters:

• Lenders can switch to another if one AA experiences downtime without compromising the operations.

• Lenders can get broader access to financial data, ensuring higher approval rates and better customer experiences.

• This flexibility also helps lenders build better customer journeys.

• Financial institutions can grow their lending operations with few interruptions, which improves efficiency and builds customer trust.

FinBox Report: How AA curbs fraud and improves conversions in digital lending. Download here!

From an experiment to a gamechanger

Since 2021, over 9.7 million loans have been facilitated through AA, which is now incorporated into 10.52% of personal loans, 1.14% of MSME loans, and 1.50% of motor loans. The framework is becoming a default infrastructure for digital lending, much like how UPI transformed payments.

According to the latest data, the AA platform has enabled 143.61 million data-sharing transactions which are consent-based and has seen a monthly growth rate of 12%. At present, there are 17 account aggregators in India, and more than 636 financial entities that fetching data through AA.

For financial institutions that have yet to embrace AA, the question is no longer whether you should integrate AA into your lending ecosystem but how quickly you can adapt to stay ahead.

Reading List:

• RBI liquidity boost may lower lending rates sooner than expected

• Banks write off bad loans worth Rs 16.35 lakh crore in last 10 years

• RBI governor Sanjay Malhotra urges urban cooperative banks to regain depositors' trust

• Bank earnings growth could bottom out in FY26: Motilal Oswal

• Public Sector Banks must focus on capital strength, cost efficiency: Govt

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on X here and follow FinBox on LinkedIn to always get all updates.

Cheers,

Mayank All opinions expressed are my own and do not necessarily reflect the views of FinBox or its promoters.