Bank of Dreams

Despite our less-than-rosy forecast for short-term adoption , we think that long-term –  probably within the next 36 to 48 months – account aggregation will become a standard online banking feature.

Banks desiring a state-of-the-art Web image (such as Net-only banks) and traditional banks looking to grow via the Net, will want to add account aggregation no later than year-end 2001. But others can defer the project until 2002 or later, leaving it to the pioneers to educate the market. No matter which camp you are in, you need to understand and personally use aggregation services now so that when the time is right you are prepared to act quickly.

Table 1

Account Aggregation Timeline

Source: Online Banking Report, 8/00

To ensure that you are not simply building an account aggravation service, consider the user benefits. We’re not certain consumers are ready to see account information from multiple providers in one spot. Research shows that consumers prefer to have financial accounts diversified across providers. A reporter recently confided to us that he would never have his loans and deposits at the same bank because he fears that the bank would dip into his deposit account to repay the loans if a problem arose.

So what are the real benefits of account aggregation for the mass market? It’s a good question, and one that we haven’t quite put our finger on just yet. Table 2 shoots down several widely touted aggregation benefits.

Table 2

The Shaky Value Proposition

Source: Online Banking Report, 8/00                                                         ð

The bottom line – simply aggregating a bunch of financial data – provides little real benefit to the user. If you are thinking about simply dropping a link on your site to Yodlee, forget it. Do yourself and your customers a favor and add the weather forecast instead. It’s much easier to use and provides more benefits for the vast majority of users.  

Yahoo’s account aggregation is tightly integrated with its popular Yahoo! Finance site (see Accounts in the center of the page).

While we aren’t thrilled with the plain vanilla version, value-added aggregation integrated with your existing services is another matter. Once users receive obvious tangible benefits such as money savings, peace of mind, and/or time savings, we think it will catch on big time.

We believe the key to making it work is how tightly it’s integrated into your existing offering. Users should be able to add an outside account just as easily as adding a new account from your bank. Notice how Yahoo has simply posted an “add a bank” link on top of its popular Finance section . It makes it sound easy to set up and users don’t have to go through a lengthy purchase decision to give it a try.

Another important factor is seamless funds transfers across all accounts, not just internal ones. It should be just as easy to transfer funds from a Citibank account to your checking account (and vice versa), as it is to move funds from your checking to your savings. Finally, the key ingredient for profitability is a tightly bundled credit lines so users can easily transfer loan balances from competing companies to yours. You’ll also want enough flexibility in the system to offer price incentives for balance transfers.

Table 3

Building Value into Account Aggregation

Minimum requirements for account aggregation

• Bank branding: a “Powered by YourVendor” logo is acceptable, but your brand must dominate or users won’t trust the service
• Plain language security and privacy statements
• Integration behind your online banking password
• Integrated line of credit: a credit line that can be tapped to take care of cash shortfalls in any aggregated account*

Advanced personalization and automation features

• Interbank funds transfer*
• Quicken-like budget and categorization of transactions
• Report writing across all accounts
• Email alerts across all accounts
• Fraud and privacy protection features/alerts
• Bill payment integration and scheduling
• Loan payment integration
• Financial planning features
• Personalized financial “recommendations”
• Small business modules
• Meta-customer service: help users resolve problems even at other providers*
• Downloadable in QIF, ASCII
• Deal finder: Notifies users of savings opportunities quantified with the user’s actual balances; for example “You are carrying a $3,000 balance at Citibank at a 17.9% APR. To save $38.12 per month, we recommend transferring the balance to your MBNA card where you have a 3.9% introductory rate. Press TRANSFER to move the money now.”

Automation Features

• Automated interbank sweep
• Automated bill payment
• Automated asset allocation via mutual funds and/or equity baskets

Optional Features

• Monthly/quarterly/annual paper statements covering all aggregated accounts
• Tax preparation
• Scan-and-pay bill pay options

Source: Online Banking Report, 8/00

*good cross-sales tool

Naming

One problem with pioneering a new feature is educating the market on its benefits. It took more than a decade to educate consumers on the benefits and safety of microwave ovens. Account aggregation has many of the same educational issues, without the obvious benefit of a steaming plate of lasagna. Users want to know: What is it? What does it do for me? Is it safe?

To help the education process, the service needs a better name than statement/account aggregation or screen scraping. One of the best names we’ve seen is Virtual View from VirtualBank.com, but that works primarily with their unique bank branding. We’re not sure what to call it: uni-statement, one-click statement, build-your-own-statement, Quicken (oops, that’s taken)? So we pose the question to readers. Do you have a great idea on what to call this thing? If so enter send it our way. The winning entrant will receive a DVD player or 13” TV/VCR. Send your ideas to namethething@onlinebankingreport.com  (in the case of a tie, the first entry wins).

Most of the talk about account aggregation is feature based. The program does X, Y, and Z. But users need to know what it will do for them right now. Table 7 (right) provides ideas on how to position aggregation as a consumer BENEFIT rather than a product or technology FEATURE.

On Aug. 30, Yahoo launched an account aggregation service powered by VerticalOne.
The same day, Wells Fargo announced, it too, had signed with VerticalOne to build an account aggregation service to be available by year-end.

Table 4

Product Positioning

*The service could have its own URL, such as www.MyEverbanker.com , or it could be used with the regular URL, such as mybanker.everbank.com, or both

So far, account aggregation has been positioned as a free service at the few companies who’ve launched it. While that fits the pre-April Internet model of providing free services to attract eyeballs, we believe that strategy is flawed.

Here’s a service that can and should demand monthly or annual fees. We think users will have more trust in the service if they are required to pay a nominal fee (see Table 5). If it’s free, users will suspect that service quality is shoddy, or that account data will be sold to the highest bidder. * It’s like surgery; do you want the lowest cost provider handling your surgery? No, you want the best. The same goes with safeguarding your financial data. OK, so account aggregation isn’t brain surgery, but you get the point.

Think like Federal Express. You can be paid well for taking care of the customer and providing comprehensive tracking tools. Also, by charging a fee, users will be motivated to follow the 16 steps to become an active user While fees will discourage trial, that can be mitigated with special offers.                   

*We like how Stacie Zoe Berg, writing in TheStreet.com, put it: “

If a complete stranger approached you on the street and offered to take care of all of your household chores -- free of charge -- if you would just hand over your house keys, would you?  www.thestreet.com/funds/investing/987002.html

Table 5

Account aggregation Pricing

It’s pretty clear that most banks will outsource the core technology. Even the largest U.S. banks such as Citibank (Yodlee, see screenshot right), Chase (Yodlee), and Wells Fargo (VerticalOne) have signed on with vendors. Building a “scraping engine” and keeping it current against an ever-changing database of 50,000 content providers is something best left to specialists who can share the costs among a large pool of clients. Table 9 contains a list of the current suppliers of account aggregation technology. Jeff Runnfeldt, of Dain Rauscher Wessels (650-234-4163, jrunnfeldt@dainrauscher.com   ) has been researching this space and gives high marks to Yodlee and its proprietary scraping technology that uses fuzzy logic to capture a data field even if it’s changed positions since the last visit. We will look at the vendors in more detail in a future issue.

Even if you are not planning on launching your own account aggregation function in 2001, there are things you can do now to prepare for its growing popularity:

1.       Beef up security procedures on monetary transactions: The simplest way for banks to thwart hackers and frustrate screen scrapers is to require periodic password changes. But this is tough on users and a burden for customer service. A better approach is to require an additional “transaction password” whenever users want to move money out of an account. Customers would be encouraged to NEVER give their transaction password to anyone or any Web site.

2.       Educate consumers on how to avoid fraudulent virtual banking services and Web site spoofs: We recommend a low-key approach enlisting the support of the customer, but not threatening to leave them high and dry if there is a problem. For example: “Please be aware that we cannot guarantee the privacy of your info if you give your password to a third party.”

3.       Review your Web site design in light of the fact that users arriving from aggregators may already be logged in and will miss any marketing or navigation messages displayed on earlier pages.

4.       Work with aggregators to ensure that customer data is safe; forge partnerships for favorable placement on third-party sites.

5.       Lobby for oversight of statement aggregators and e-payment companies (license requirements, bonding, SAS 70 audits, etc.).

6.       Train your e-reps on EXACTLY what to tell customers about specific aggregator sites.

7.       Flag accounts being scraped and send periodic “warnings” to customers notifying them that a third party is downloading their account data.

8.       Develop fraud detection algorithms to watch for unusual withdrawal activity; and potentially seek confirmation from the customer before processing any large or suspicious withdrawals.

9.       Send an email to the user each time their account is accessed.

10.    Monitor your log files to see how much activity is coming from aggregators.

11.    Most importantly, plan to offer account aggregation yourself, so that the activity takes place on your turf, not a Web site in Azerbaijan.

It took awhile but Citicorp finally came out with a world-class Web site, www.myciti.com , which is built around Yodlee’s account aggregation engine. www.Myciti.com  is more than just account aggregation however. The site also does an excellent job selling financial products using a benefits-oriented approach. For example, users can enter their age and income for a customized list of appropriate products.

Table 6

Account aggregation Suppliers

Table 7

Screen Scraping Scorecard: Who’s Playing with Whom

Source: company and industry reports, 8/00; TBA = to be announced