10 September 2002
Account aggregation stands to benefit banks as much as consumers. The caveat: this implies consumers will actually use the service
By David Hallerman
Next to online bill payment, account aggregation is the most ballyhooed service among internet banking�s offerings.
Quick definition of aggregation: Giving customers information about all of their finances in one place online.
More complete definition of aggregation: At a customer�s request, gathering account information from various websites using that customer�s passwords and making that account information available to the customer at a single website operated by the aggregator. The aggregator might be a financial service firm, such as a bank, or it could be a third-party site, such as Yahoo! or MSN Money.
Similar to the industry�s intent with electronic bill payment, banks hope to use aggregation to win new customers and retain existing ones. And, with new tools available from aggregation providers such as Yodlee (by far the largest third-party provider), banks will be able to segment out customer data from other institutions and use that data for targeted marketing.
This puts banks on a tricky footing. While any bank would love to �see exactly what accounts a customer holds with the competition and woo them over with better offers,� as Bank Technology News put it, the same article says that �banks armed with this technology will be able to pillage their rivals� databases.�
Pillage offers up one image, and competition like this does not guarantee to help aggregation. But banks, at least, appear to have the inside track, according to the 2002 �American Banker/Gallup Consumer Survey.� While 43% of respondents distinctly prefer banks as their account aggregator, and 55% say it doesn�t matter, only 3% would rather have another type of company aggregate their financial data.
While the market for aggregation is there, its strength is suspect. In the American Banker/Gallup survey, 52% of respondents expressed no interest in aggregation. Meanwhile, some research firms, such as Forrester, expect aggregation to expand from 0.7% of US online households in 2002 to 2.7% by 2003. Raddon — an IL-based financial service consulting firm that appears bullish on the service — said that in July 2001, 3% of US households (total, not just online) were aggregating accounts. And Yodlee claims to have 2.7 million users worldwide.
Estimates from eMarketer for the US alone indicate 1.8 million consumers using various account aggregation services in 2002. In three years, the aggregation take-up by consumers should rise by more than 6 million. These figures represent active customer use of aggregation, not including those who sign up and then forsake the service.
Still, when aggregation�s customers are viewed as a percentage of US internet users ages 14 or older, the penetration rate will be nothing to write home about, reaching 4.7% by 2005.
In an article earlier this year, Wall Street & Technology magazine outlined aggregation�s rewards and hazards for financial service firms. It�s enough to summarize the piece here, noting particularly that one listed benefit is �competitive differentiation.� If all major banks offer aggregation, how does that help one institution differentiate itself from another?
Perhaps the answer to that question comes from changes Wells Fargo made in May with its aggregation offering. The bank switched from standalone account aggregation, with a separate sign-on and little connection to the rest of its online banking, to bundling it with single sign-on. That seemingly simple move rectifies a disparate situation that has hardly helped build support for aggregation. Wells is just the first institution to take the suggestion Gomez made in American Banker: �Our advice to banks is to integrate account aggregation into the current online banking interface.�
Good advice. The more online banking services cohere, the more consumers will find ways to make them part of their regular banking routines.