While Yodlee Inc. has captured the lion's share of the account aggregation market - and the buzz that goes with it - a second company in the same market, Teknowledge Corp., is mounting a challenge, and dangling its new contract with Wells Fargo & Co. as evidence of its might.
Teknowledge, of Palo Alto, Calif., got its start in 1981 as an artificial intelligence company, then began doing contract research and development for the government - primarily the Defense Advanced Research Projects Agency, or DARPA, which was one birthplace of the Internet. In 1999 the company decided to focus on account aggregation for the financial services industry. Its first aggregation software product, TekPortal, was introduced in May 2000 and now has 40 customers (a third the number of Yodlee).
Yodlee, which was founded as an aggregation company, has already signed up the biggest marquee names in the financial services industry, but Teknowledge says that it is targeting small and midsize financial institutions and that a difference in the way it handles the technology is a big selling point.
Under Teknowledge's system, financial services companies host the aggregation service and software themselves, versus outsourcing it to a vendor. Teknowledge calls this an "on-premises" system, and says that it is preferable to banks because it gives them more control and more security for customer data.
"We view the market as moving towards an on-premises account aggregation model as a way for banks to control costs, integrate the data into other channels within the bank, and integrate the data into their applications a little more closely," said Neil Jacobstein, the chief executive officer of Teknowledge.
He said the Wells Fargo contract, announced May 17, is an important milestone for Teknowledge and could make a "very material difference" for the company.
"It is a leading bank, and other banks look to them to see what they are doing, and soon other banks will take notice and follow suit," he said.
Then again, Wells Fargo had already developed its own account aggregation service, OneLook, and will be using Teknowledge's TekPortal software as an enhancement. Many companies that are less tech-savvy than Wells do not have the resources to develop this technology on their own.
Yodlee recently announced an on-premises offering too, but Anil Arora, the company's chief executive officer, said in a recent interview that he did not anticipate it would be a popular option, because it requires a great deal of technology infrastructure and is "complex operationally."
He said that 60% to 70% of Yodlee's 120 clients - which include American Express Co., Bank of America Corp., Citigroup Inc., and J.P. Morgan Chase & Co., to name just a few - have chosen a fully outsourced package in which Yodlee handles everything. Yodlee recently introduced a new customer relationship management tool that lets banks mine the data of their rivals.
Sara Campbell, the vice president of business development, financial systems, at Teknowledge, acknowledged that the Yodlee model, in which financial institutions outsource their account aggregation service to a third-party provider, is viewed as an easier option than hosting an entire system, and that this has been a hurdle for her company.
With Teknowledge's on-premises system, financial institutions serve as hosts to all the data - including the account information they take from other companies. "They were scared of it in a way," Ms. Campbell said. "They weren't sure if they wanted to hold their competitors' data."
Both Yodlee and Teknowledge rely on screen-scraping, a practice that the industry is trying to move away from (and toward direct data feeds), but Teknowledge relies on it more. Mr. Arora of Yodlee says his company now uses screen-scraping to collect 65% of the account data it presents, down from 100% at first, and that his goal is to reduce dependence on this method to 30%.
By contrast, 90% of Teknowledge's data comes from screen-scraping and 10% from direct feeds, Ms. Campbell said.
Wells Fargo sent an e-mail response to questions about why it selected Teknowledge.
"Teknowledge's solution gives us greater flexibility in offering our customers increased convenience and a more highly-integrated experience to providing customers with one-stop access to their complete financial picture," wrote Wendy Grover, a Wells Fargo spokeswoman. "By integrating OneLook with its leading single sign-on service, Wells Fargo is providing customers with a more seamless experience."
Ms. Campbell of Teknowledge said that when a financial institution hosts its own account aggregation service rather than outsourcing it, the system can be more easily integrated into the financial institution's existing applications, and customers do not have to authenticate passwords more than once to get to their aggregated information.
She also said that the on-premises model was more cost-effective, because the financial institution pays a one-time software license fee instead of incurring ongoing charges.
"This way, you are not exposing your customers to a third party," Ms. Campbell said. "It is a safe proposition, as the information is in a bank data center and it is always secure."
Aside from Wells Fargo, Teknowledge's account aggregation customers include Netbank Inc., BankAtlantic Bancorp., Fiserv Inc., and Pacific Capital Holding Co.
Last year 42% of Teknowledge's $17 million of revenues came from commercial sources (including the account aggregation software), and 58% from government-sponsored research and development. The company says this ratio continues to shift toward the private sector. In the first quarter it posted a loss of $283,000 on revenues of $3 million, but Mr. Jacobstein said that followed 30 quarters of profitability.
Teknowledge trades on the Nasdaq small-cap market; Yodlee, which is private, says it is approaching profitability.
Avivah Litan, an analyst with Gartner Inc, said it was "good to see some competition" among aggregation vendors. "The market is definitely growing, and there is room for two players."
Wells Fargo had "already built this infrastructure," she said. "To have a solution that's disconnected from their other account aggregation would defeat the purpose of giving customers a unified view of their Wells accounts and their external accounts."
Ms. Litan said an on-premises solution makes sense for a financial institution only after it has a critical mass of customers using aggregation. Software costs account for only about 10%-20% of an aggregation system, and maintenance and development account for the rest, she said.
Teknowledge could capture 15% to 25% of the aggregation market within two or three years, and Wells Fargo gives the company "instant credibility," Ms. Litan said.
Ariana Michele Moore, an analyst with Celent Communications in Boston, said: "Aside from alleviating security concerns and enabling a financial institution to control the data, an on-premise solution gives a financial institution the ability to fully integrate the solution into its core online offering. Ideally, the on-premise solution is the way to go. However, the ASP model is more realistic for those banks who either lack the resources or expertise to bring the solution in-house."
