Bank customers supposedly are going gaga about account aggregation.

"E-enabled" by this latest Internet banking craze, customers are anxious to reap the benefits of consolidating their financial data from a variety of institutions at a single place on the public Internet.

Gaining these benefits is simple; all you have to do is provide your account numbers and confidential passwords to someone else, a practice tantamount to handing over your identity.

While the practice sounds counterintuitive to bankers, customers can't wait to sign up - so it is said. A June 4 report from Reuters gauged the number of current account aggregation users at 100,000. A June 19 story in American Banker put the number closer to one million. That's 1,000% growth in just two weeks.

Recently a number of banks, after wrestling inconclusively with the complicated set of privacy, security, and property rights issues raised by aggregation, have opted to ignore their innate (and perfectly reasonable) concerns.

Fear that a competitor - especially a nonbank such as America Online - may capture a customer's allegiance with the lure of aggregation is all the reason banks need to embrace the service.

It won't be surprising when the entire banking industry follows suit by offering some variation of "next generation" aggregation.

Of course, no one really knows how many aggregation users there are now, are about to be, or may ever be. But facts and figures make absolutely no difference in terms of what happens next regarding aggregation.

Bankers have heard this all before, and we are obliged to take a responsible position.

The truth is, this latest Internet banking idea will not be received any better - or any quicker - than its predecessors have been. Even with trusted institutions like Chase, FleetBoston, and First Union lending legitimacy to Web aggregation, the adoption rate will most assuredly lag even the most conservative estimates, just as it has with earlier online initiatives.

But the reason is not just that assessments of customer demand are exaggerated. The banking industry has spent 30 years and countless millions of dollars educating the public not to disclose their password to anyone.

That said, it is curious that, after all the hand-wringing about Internet security, so little has been said about the prospect of consumers handing over account numbers and passwords to a third party on the public Internet.

Folks, what we are talking about here is a security concept that makes controls at the Los Alamos National Laboratory look absolutely impenetrable by comparison.

The flip-flop on security is easily explained when you apply New Economy logic: There is money to be made by introducing Internet payment systems. If promoting fear about security helps create a demand for new systems, it is a threat worth repeating loudly and frequently to potential customers (and a business idea worth more venture capital funding).

However, if that same security gets in the way of those hoping ("hope" being the underlying premise in all Internet banking initiatives) to make money from account aggregation, then by definition security must not be a problem. Talk around it. Gloss over it. Ignore it. Then dismiss it.

Bankers' experience with the introduction of new technologies provides us with a sense of what will happen next.

With the exception of a relatively small group of early adopters who will use anything simply because it's new, different, and trendy, customers will not hand over their IDs in sufficient numbers to justify the development expense, marketing costs, and litigation risk of introducing this service.

That most customers are very cautious about how they handle their money flies in the face of the logic behind aggregation.

Further, bankers deserve credit for helping educate the public about erring on the side of caution with their personal finances, especially where privacy and security are concerned.

Like it or not, this conservative tendency defines and limits almost every aspect of a banker's business. There is no meaningful example of a new financial product or service being adopted - by banks or by customers - more quickly than projected (or hoped for). In fact, every change takes many times longer than anticipated to reach the point of widespread acceptance.

Don't bet that aggregation is any different from the Internet banking propositions that preceded it. What's more, I'm not convinced that it's such a good idea for our customers.

What we have is another example of a solution in search of a problem. Few customers will actually conclude that the convenience of pointing and clicking on a link to retrieve consolidated information is worth handing over their personal identities.

Frankly, bankers better serve our customers' trust by acting on our natural wariness of the latest craze in Internet banking - especially dubious ideas like aggregation.


Mr. McGrath is managing partner of Bank Earnings International LLP, a financial services consulting firm in Orange, Va.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.