Affluent Appeal

By Julie Monahan

Though no longer glamorous, account aggregation still may have a future in supporting wealth management applications.

Online account aggregation has fallen so far off banking's radar screen that it's difficult to recall how much excitement the technology generated only a few years ago. Originally known as "screen scraping," aggregation promised to supercharge online banking by allowing customers to view accounts from multiple institutions at one Web site.

Today, account aggregation is languishing amid customer disinterest. Many institutions still offer it but active promotion is rare. The question, "Why bother?" looms large for online managers. Estimates of the total number of registered users range from 1.5 million to four million, a drop in the bucket when compared with the 25 million U.S. households that now bank online.

The answer to "Why bother?" may reside in linking aggregation to other wealth management applications. "Most financial institutions have recognized that aggregated account information presented in a static, passive format only goes so far," says Joe Helweg, senior vice president of channel strategy and e-commerce development at Bank of America Corp. in San Francisco. "Funneling that data to other applications is the future."

These other applications include electronic bill presentment and payment, where a single login pulls up bills from multiple sites, and personal financial management. The latter would be greatly facilitated if customers and their financial advisors could view all the relevant data on one screen accessible through a single login, instead of having to copy the information from multiple screens.

That can be done more easily with a new technology known as "data cleansing." Simply put, data cleansing allows the user to sort through a variety of data formats and organize information around one standard, such as a financial security's registration number. An advisor could then divide a client's assets into the pertinent investment categories, such as large cap and small cap.

This upgrade will require some additional investment. And many financial institutions will be reluctant to step up to the plate given the disappointing results so far. Certainly, the prospects for this technology catching on with the mass market are bleak. Forrester Research Inc. estimates that less than 10% of all households will ever aggregate their financial accounts online.

The affluent market, however, does offer some tangible opportunities. People with complicated financial arrangements already find account aggregation a great help in their planning exercises, particularly when working with financial advisors. This suggests that institutions targeting affluent clients can best justify further outlays to improve aggregation capabilities.

Lackadaisical Marketing

Account aggregation emerged at the end of the '90s, driven by vendors such as Yodlee Inc. and Vertical One. It allows an individual with the proper passwords to electronically extract information from financial services Web sites without the sponsoring institutions' knowledge, hence the term "screen scraping."

Because of privacy and security concerns, banks were initially hostile — one even filed a lawsuit against the vendors. But this stance moderated to grudging acceptance when institutions began to suspect that account aggregation might help them to deepen relationships with online customers. Most major U.S. banks adopted the service, replacing in some cases the unauthorized scraping with direct data feeds to the aggregation vendors.

In the wake of the dot-com crash, however, enthusiasm has slumped. Massachusetts-based Salem Five Cents Savings Bank, for example, dropped the service after concluding that only 10% of online customers who signed up for aggregation used it regularly. City National Corp. in Los Angeles discontinued the service to pursue other online services having more potential.

Eastern Bank Corp. in Boston, which has $4.5 billion of assets, balked at renewing its contract when the vendor tried to charge five times the cost of its first agreement, according to Joe Riley, senior vice president of e-commerce. "The technology wasn't completely there yet," Riley says. "Then the question was, 'Are we willing to invest in this technology given the limited functionality?' and we weren't."

To some extent, retail account aggregation continues to be a victim of lackadaisical marketing. Few institutions aggressively promote the service and many customers may not even know it is an option. "One reason it's not catching on is poor positioning within online banking platforms," says Beth Robertson, a senior analyst at the TowerGroup Inc. in Needham, Mass.

Many customers also may not yet understand the term "account aggregation," or "account consolidation," as it is called on some Web sites. Others are put off by technical problems or security concerns. As a result, banks that continue to offer the service do so for reasons other than satisfying widespread customer demand.

For example, Charlotte-based Wachovia Corp., which uses Yodlee's technology, is interested in mining aggregated customer data for targeted marketing and product development. "We can take summary data and use it to influence how we highlight opportunities for some of our online customers," says Parrish Arturi, senior vice president and director of e-commerce strategy. "Before, we could only hypothesize where customers had their money."

Wachovia reports that 100,000, or over 5%, of its online customers use aggregation. The banking company is particularly interested in the "emerging affluent" demographic segment, composed of individuals with annual incomes above $50,000 and income producing assets of less than $1 million. This segment comprises some 40% of the bank's account aggregation users. In Wachovia's view, the more ways the institution can interact with those customers, the better the potential for gaining more share of their business. "That leads us to believe there is some value (with aggregation)," Arturi says.

But building on that value will require a more robust functionality. According to Arturi, Wachovia's own market research shows its customers are eager to use aggregated data for funds transfers, financial planning and budgeting.

Single Login

Clearly, improving functionality is the holy grail of account aggregation. And the impetus is coming on two levels. First, financial institutions are looking to leverage aggregation technology with other applications, such as the online banking platform, electronic billing and payment, and various kinds of personal financial planning software.

Secondly, the aggregation process itself continues to improve. This year, for example, Redwood City, Calif.-based Yodlee introduced a series of enhancements that include enabling users to view and pay aggregated bills with their Yodlee login.

The company also has greatly expanded the number of sites where it collects data, to 8,000 from just 400 three years ago. Account information itself is presented in greater detail and massaged to follow a standard format for certain financial holdings, such as mutual funds and individual stocks and bonds. This refinement, says president and chief operating officer Anil Arora, allows for better integration with wealth management and personal finance software tools.

Further addressing the integration issue, Yodlee now offers a software development kit banks can use to link Yodlee with their own online banking platforms so customers only have to log in once to access their aggregated accounts. Currently, the vast majority of Yodlee customers — including 100 banks and four million registered users, half of whom are considered active — must first log in to their institution, and then enter a Yodlee password to see their aggregated accounts.

In addition to enhancing the technology's appeal to consumers, a single login can directly impact customer profitability. Since 1999, Atlanta-based NetBank Inc. has used a single login aggregation solution from Teknowledge Corp. in Palo Alto, Calif., that gave the bank an important tool for facilitating new accounts.

After checking account balances with another institution, customers can immediately transfer all or part of those funds to their NetBank account. "That in itself has made the product worthwhile," says Eve McDowell, chief marketing executive and chief sales and customer fulfillment executive. To date, nearly 23,000 NetBank customers, or 14% of the total, use aggregation. The system aggregates more than 52,000 accounts.

NetBank is now building on this modest success in preparation to launch financial planning and brokerage services. By analyzing which customers use Teknowledge's aggregation portal to pull data from outside brokerage accounts, the bank has generated a customized list of potential customers for its own offerings. "Aggregation will help us personalize the marketing message to make sure it's relevant," McDowell says.

Streamlining Planning

Financial planning, particularly when used in conjunction with financial advisors, may represent the best use of account aggregation technology. And here the target market is typically upscale rather than middle class. "Aggregation most benefits the wealthier investor who has multiple advisors at different financial institutions, not the mainstream consumer with few assets beyond his time deposit and 401(k)," writes Forrester Research analyst Jaime Punishill in a recent report.

This strategy makes particular sense considering that the affluent comprise a significant share of those customers who already regularly use retail account aggregation. "The ability to see your full financial life has a different meaning to a more affluent customer," says BofA's Helweg. "There's more of a real value proposition."

Value accrues to the institution as well with a priceless view into customer holdings. And banks can help solidify those relationships by providing services such as pop-up windows at the point of login to show a sample of aggregated net worth, or alerts such as those telling when a borrower is close to maxing out on a credit card.

Mainly though, aggregation serves to make advisors more efficient by streamlining the data gathering process. Instead of asking customers to provide paper-based account statements, which may be out of date and awkward to compile, advisors can access the data online with a single aggregation password, thereby gaining a more accurate view of the client's financial performance. The customer retains control of the process, however, since he or she can restrict the advisor's access by changing the password.

A full analysis depends on having direct-feed access, which requires the cooperation of the institution providing the data, not just the account holder. Data must then be massaged into usable form, a process known as "data normalization" or "data cleansing."

Data cleansing has become the latest buzzword in aggregation. It helps the system sort through the variety of data formats and organize information around a standard, such as a security's CUSIP (Committee on Uniform Securities Identification Procedures) number. Such a feature would help a portfolio manager divide assets into predetermined categories, such as large cap or small cap investments, which are based on CUSIP numbers. "That's a watershed in the brief history of account aggregation," says Neil Platt, vice president of sales and business development at Cash Edge, Inc., a New York provider of account aggregation for the retail and advisor markets.

Despite the challenges of the past two years, therefore, many institutions remain enthusiastic about the future of aggregation for targeted customer segments. Last spring, nine community banks agreed to license Yodlee's aggregation service through S1 Corp.'s integrated online banking platform. Private Bank Minnesota was one of them. "I hear account aggregation isn't popular but when I talk to our customers, they're excited," says Carolyn Lundstrom, electronic banking officer at this $105 million asset institution, which is a subsidiary of Private Bancorp Inc. in Minneapolis.

The key to keeping that excitement going is pragmatic functionality. If popularity with the important affluent market can keep account aggregation growing, that holds open the possibility that a far more robust version could still gain mass-market acceptance down the road.

Even Eastern Bank's Riley expresses enthusiasm about aggregation's potential, despite the fact that his institution discontinued the service last year. "When aggregation is integrated with online banking platforms and allows for interbank transactions, you'll have a mainstream application," he says.

Ms. Monahan is a freelance writer based in Seattle.

Copyright © 2003 by Banking Strategies, published by BAI.

back to top