The history of account aggregation, the ability to access various account information on one secure Internet site, is short and indisputable.
Venhat Rangan developed the technology for account aggregation in 1998 and founded Yodlee Inc. in February 1999. By the following September the first version of account aggregation was successfully tested and Citigroup, in July 2000, became the first financial institution offering the new technology. Soon after the floodgates opened and account aggregation is now offered by a variety of banks, brokerage firms, credit card companies, portals and credit unions.
However, as simple and concise as account aggregation's history appears, and even though a growing number of credit unions now offer it to their members, the future of the service is unclear.
Today there are a million and a half registered users, says Jim Taschetta, chief marketing officer for the Redwood Shores, CA-based Yodlee. Fifty to 60 partners are deployed with 10-to-15 customers doing the bulk of the business, adding 5,000 to 10,000 users everyday into the network, and the growth rate is accelerating.
Taschetta estimates five million customers will use account aggregation by year's end and notes analysts project 24 million users by 2003. He also says such rapid growth far surpasses most other new technologies, such as online bill paying, a five-year-old system that languishes with from one-to-three million users.
Credit unions from coast-to-coast are introducing account aggregation. But, despite its continuing popularity, some say financial institutions need to take a long look before jumping into account aggregation. I don't see it as a big deal for them, says Ray Graber, senior analyst at TowerGroup in Needham, MA. Account aggregation will not make or break a financial institution. Large banks have to have it, but small credit unions should offer online banking first.
Before a credit union offers account aggregation, Graber says they need at least $1 billion in assets. He also predicts the growth of account aggregation will slow, comparing its growth to the overall slow growth of Internet banking. Internet banking grew very slowly, Graber says. After four years, we project only 19 percent of all households do net banking; 9 percent of all households do bill payment.
Pointing out that the United States has 103 million households, he predicts about 1% of those now use account aggregation and that by 2004 that number may grow to only 4.5%.
Still, the push for account aggregation among credit unions seems to grow unabated with competitive concerns being one factor driving the enthusiasm.
At Callahan Partnership members began noticing their Web sites being hit in the middle of the night, says Simpson, and figured out aggregators were getting in; they were getting screen scraped.
The term screen scrapers applies to aggregators who pull the data of customers for account aggregation at other institutions. When financial institutions see their customers being screen scraped, they often become proactive.
It takes time for individuals to set up aggregation, for instance, entering all the necessary passwords, Simpson says. They're not going to want to do it again with another financial institution. So we decided we needed to do it first.
Entering the account aggregation arena through a consortium such as Callahan or CUTech allows credit unions to compete with financial institutions as large as Chase Manhattan, Merrill Lynch or the Vanguard Group.
With Yodlee, which claims control of 99% of the U.S. market, the cost of setting up account aggregation ranges from $400,000 to $1 million, including the initial licensing fee. To that charge add a $10- to-$12 annual fee for each user with initial contracts running an average of two-to-three years, though Yodlee's Taschetta says some contracts are now being rewritten for longer terms.
Account aggregation, says Raquel Garcia, a CUTech vice president, is a way of enriching the product a credit union offers its members. It puts them in the same league as retail banks and larger credit unions. This appeases the individuals who have expressed that they would like to have all their information in one spot.
Customer information is as individual as they are, ranging from bank accounts, mortgage payments and credit cards, to frequent flyer miles and stock information.
For some credit unions, such as the Pennsylvania State Employees Credit Union (PSECU), based in Harrisburg, PA, account aggregation is a particularly good fit.
The credit union, with $1.6 billion in assets, is essentially branchless, says David Jamison, PSECU's e-services manager and the project manager for an account aggregation program being launched in mid-July. PSECU's 268,000 members are accustomed to electronic contacts with the credit union, either through online banking or the telephone. Jamison expects 300 customers to sign up for account aggregation within the first month, estimating that number to grow to 1,500 or 2,000 within the first year.
Started as a state employees' credit union, PSECU's membership is now much broader, focusing on customers associated with universities and including faculty, staff, students and alumni. This is the generation we're trying to prime who will go more into account aggregation, Jamison says.
Another credit union that has found account aggregation a good fit is Seattle-based Boeing Employees Credit Union. With $3.5 billion in assets and 285,000 members, 30% of whom bank online, Boeing follows the Forrester Research open finance model, says Tom Berquist, Boeing's vice president of marketing.
The Forrester model embraces the four concepts of letting customers know what they own, how they're doing, rendering advice, and allowing the movement of assets between institutions.
Most people, Berquist points out, have their assets scattered making it hard to achieve the first step of letting people know what they own. So, when CUTech began offering a solution to that problem through account aggregation, Boeing was ready. Since February, when account aggregation came online, and despite no marketing while the credit union redesigned its Web site, some 4,300 of Boeing's customers have registered for the service, far exceeding projections of 6,000 within the first year.
Boeing moved forward with offering account aggregation before the Web redesign because, like Callahan Partnerships, their customers were being screen scraped.
There'd be a spike (of hits) at 2 a.m., Berquist says. We're aware that some of our members have account aggregation elsewhere and we'd prefer to have our members aggregate with us rather than with another financial institution.
Some stumbling blocks to selling account aggregation remain as privacy and security questions arise with many customers. Answering those questions, plus the need for regulators to develop standards for account aggregation, are reasons TowerGroup's Graber believes account aggregation will not truly catch on for a period of time.
In a recent study, Cathy Graeber, a senior analyst in Forrester Research's San Francisco office, found that early (competitive) fears are overestimated and that companies are not yet stealing one another's customers through account aggregation because they lack the business sophistication to do so. Customer demand is still relatively low right now, she says. If a financial institution doesn't know how big demand will be, how does it build a business model for account aggregation?