Empowering people to monetize their data

GS Paper III

News Excerpt: 

India has an opportunity to lead the conversation on rewarding individuals for their data used by Big Tech.

About Data Monetization: 

  • Data monetization refers to deriving value or generating revenue from data assets. It involves utilizing data resources like customer information, market insights, or operational data to create new revenue streams or enhance existing business processes. 
  • This can include selling datasets, improving products or services, or implementing targeted advertising based on consumer behavior analysis. 
  • Essentially, data monetization aims to capitalize on the inherent value of data assets to drive business growth and innovation.

Why is Data referred to as a public good?

  • Non-Rivalrous Nature: Unlike traditional resources like oil, data can be used by multiple users simultaneously without diminishing its availability to others.
  • Value Addition: Data's value often increases with its usage and analysis, contributing to economic and societal development.
  • Potential for Empowerment: Systems like India's Account Aggregator (AA) facilitate individuals and businesses in leveraging their data for personal and financial benefits, leading to greater empowerment and inclusivity.

India's Role in the Global Data Economy

  • India’s progress on the digitization front has opened the doors for the emergence of its data economy. 
    • The total data consumption in India has seen a major increase going from 53,42,792 GB between January-March 2023 to 69,50,508 GB between April and June 2023, according to the Telecom Regulatory Authority of India’s (TRAI) report.
    • The success of the Unified Payments Interface (UPI) and the ensuing tempo in digital transactions, opens possibilities for rapid growth of consumer transactions data. 
    • The advent of the Open Network for Digital Commerce (ONDC) promises the emergence of a rich reservoir of data on consumer preferences. 
    • India is currently ranked as the 13th largest data center market in the world.
  • A variety of players operate in India’s evolving data ecosystem. 
    • At the data-providing end, one sees large data-generating entities like Amazon, Flipkart, Swiggy, etc platforms, co-existing with small data-providing companies that scrape data from the web and turn them into structured data sets.
  • Data users in India are a heterogenous lot, ranging from corporates that source analyzed data from large data providers to Small & Medium Enterprises (SMEs) and start-ups that buy raw or semi-processed data from smaller providers and utilize Software-as-a-Service (SaaS) tools to fine-tune them to meet the specific needs of their customers.
  • However, India does not enjoy the presence of robust, home-grown, data trading platforms. 
    • Most data-related transactions are performed ‘over-the-counter’, on a fixed price basis. 
    • Many small data providers are not able to access a wider network of data-seekers
  • India's regulatory framework aims to balance individual privacy rights with fostering an environment for data-driven innovation and business growth.
  • India's geopolitical significance adds another layer to its role in the global data economy, potentially influencing discussions and policies on data governance and trade agreements. 

What are Account Aggregators?

An Account Aggregator (AA) is a type of RBI-regulated entity (with an NBFC-AA license) that helps an individual securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution in the AA network. Data cannot be shared without the consent of the individual.

How Account Aggregation Operates:

  • Account Aggregation usually happens within a single financial institution, but users can include certain assets held outside if they agree. 
  • Personal finance services let customers 'aggregate' data from all their accounts, like savings, checking, and brokerage, across different institutions.
  • To use this service, customers typically need to provide their account credentials. The software then downloads data from each account for aggregation. 
    • Usually, the software only accesses balance and transaction records.
  • For security, many services don't allow users to make transactions through the aggregate portal. 
    • Some software used by financial advisors goes beyond, pulling in additional data like home values, categorizing cash flows, and showing debt in the overall financial picture.

AA Participants:

 The main participants of the AA ecosystem are

  • Financial Information Providers (FIP) are institutions that hold user data. These are the banks, or NBFCs that share customer’s financial information with Financial Information Users (FIU) via requests through an Account Aggregator.
  • Financial Information Users (FIU) receive digitally signed data from Financial Information Providers (FIP) via Account Aggregators. FIU uses the data to provide various services to the consumer like loans, insurance, or wealth management.

The Advantages of the AA Framework: 

  • AA makes it effortless to gather data at the user’s end and enter data at the service provider’s end.
  • AA allows faster processing and quicker access to products or services.
  • With an entire financial profile in one place service providers gauge your needs in a better way.
  • Information for each synced account is up-to-date and available online reducing the margin for errors.
  • Financial data is directly delivered from authorized accounts eliminating data errors.
  • Aggregation increases transparency by helping you get a better picture of your finances.