No series of articles on nonfinancial interlopers into financial services would be complete without a look at the portals - the technology companies positioning themselves to provide a single access point for all of a customer's financial relationships.
With account aggregation showing some staying power in the market, the question is: Will consumers choose to pull together all their finances under the auspices of a bank, or will they do so with one of the three main nonbank Internet portals - America Online, Yahoo, and Microsoft Network?
These three portals, all of which have embraced aggregation, say they have no intention of becoming financial services providers (as some bankers had feared a few years ago), but the services they are offering nonetheless have the potential to siphon a significant amount of online business away from banks. As banks strive in their Web efforts to "own" as much of their customers' time and relationship as possible, the portals represent extra suitors for the attention of bank customers.
The outcome of this debate is still in question. The banks have the advantages of their trusted brands, their ability to move money among aggregated accounts, and the fact that people are more likely to follow financial advice from a bank than a nonbank. But the portals have a lot going for them, too. They introduced account aggregation sooner, they have many more users than most individual banks, and they are more likely to let people aggregate more types of information - not just financial accounts, but news services, favorite shopping sites, and other information that people like to browse on the Web.
Executives at America Online, Yahoo, and Microsoft Network say they are optimistic that their sites will continue to attract lots of users interested in aggregating all kinds of accounts, which would pit them against banks that want those customers as their own. Executives at the portal companies will not say how many people have signed up for these services, but do say that demand has been surprisingly high.
Working in the nonbank companies' favor is that many people are introduced to the Internet through a portal, and traffic to all three is very high. In October nearly 54 million people visited Yahoo; more than 42 million went to MSN, and more than 35 million to America Online, according to MediaMetrix, a New York research firm.
Though the portals got a head start, introducing aggregation services months ago, the banks have taken an early lead in consumer adoption, according to Yodlee Inc., the aggregation vendor whose technology is used by many leading Internet portals as well as about 20 financial institutions. Yodlee's clients include Citigroup Inc., Chase Manhattan Bank, and Morgan Stanley Dean Witter & Co.
"There is a significant difference between adoptions rates of our financial institution customers and portal customers," said Anil Arora, president and chief executive officer of Yodlee, of Redwood City, Calif. "The banks we've launched are incredibly stronger than we anticipated."
Mr. Arora predicted that portal and bank sites would attract very different types of people. "Those who put a premium on trust will go to the financial institutions, and these will be the largest segment," he said. "But there is another segment who live, eat, and sleep on portals, and they will continue to aggregate there."
Each side is vying to win over the millions of customers who are said to be eager for online aggregation. Meridien Research projects that 3.1 million consumers will use such a service by 2003. All the institutions that have introduced aggregation say they have been pleased with the early results.
Yahoo Finance, which began offering aggregation on its finance channel in August, is "extremely happy with its adoption," said Timothy Sheehan, director of production for the site. "We are exceeding our expectations."
America Online, which is working with Yodlee, introduced an aggregation service in July. America Online is "pleased with the level of adoption, but we view this as more of a marathon than a sprint," said Bob Sandler, director of channel strategy.
The portals say the financial services component of their content - including stock quotes, business news, and financial analysis - is a chief attraction to consumers. Yahoo has the highest penetration of financial users, with 66%, followed by MSN with 33% and America Online with 28%, according to a Financial Services Online report released in June by Cyber Dialogue, a consulting and research firm in New York.
"I think that users will aggregate where they spend most of their time," Mr. Sheehan said. "It's great for banks to offer it, because there are some users that are active on the banks' sites. But the scale of the audience on portals is larger, and therefore more users will track their accounts" there, he said.
Each of the portals is working to position aggregation as a useful adjunct to its other services. At Yahoo, aggregation is being promoted as an additional time-saver. "Perhaps customers already use MyYahoo, and Yahoo's calendar, and several other things," Mr. Sheehan said. "Adding personal financial accounts makes a lot of sense and is a perfect fit for a number of users."
Yahoo got an early start in aggregation through a relationship it struck up in 1999 with Bank of America Corp. Yahoo users who have an account at Bank of America can choose to have their account information fed directly to the Yahoo Web site. (Bank of America, in turn, gets ad space on Yahoo, as well as a direct link from the site to its online banking service. The bank plans to offer a separate aggregation service in the first quarter.)
Yahoo began offering aggregation through VerticalOne, which was purchased by Yodlee last week, and is using mostly screen-scraping technology rather than direct account feeds to collect aggregated account data. In screen scraping, customer information is lifted from sites with the customer's permission but usually without the site owner's knowledge.
Yahoo says it continues to seek alliances with banks that will send it direct feeds. At the same time, it plans to market its aggregation service to bank customers who might visit Yahoo more than their own bank's site, Mr. Sheehan said.
America Online, which lets customers consolidate their bank, credit card, and travel reward accounts, considers aggregation an added convenience. "I'm not really sure what will drive people's decisions," Mr. Sandler said. "But we view this platform as a convenience play where customers can go see their financial data."
America Online began offering aggregation as a way to drive traffic to its other businesses. "Personalized content on our site drives not only the most traffic but the most repeat traffic," Mr. Sandler said. "But it's not a competitive advantage, because we figure that everyone is going to head down that path."
MSN began offering the service through its partner Corillian in March, though in July Corillian joined forces with Yodlee. MSN has not announced whether it will migrate to Yodlee's platform or pick another provider, Mr. Arora said.
The portal executives say they do not view financial account aggregation as a stepping-stone to more banking services. "We are not trying to circumvent banks and get into the financial world - it's just an extension of convenience," Mr. Sandler said.
"We are not going to be in the financial business," said Erik Jorgensen, general manager of MSN Money Central, which introduced account aggregation in March. "Financial institutions have to help customers make better decisions and take action, but we can do a good job in trafficking customers to financial institutions."
William C. Hartnett, global director of financial services for Microsoft, said banks have an inherent advantage in offering account aggregation.
"Quicken, MSN, and Yahoo will have a role, and brokerages and banks will also have a role," he said. "But banks have a leg up in electronic payments, which requires a trusted relationship. Banks or brokerages will be the ones that evoke that relationship."
Unlike the portals, banks can move money, offer personalized financial advice, and facilitate transactions based on the aggregated information.
"Financial institutions have more of an advantage in luring customers to these services than portals do because customers tend to trust financial institutions with financial data," said Robert Sterling, senior analyst at Jupiter Communications.
Mr. Sterling said he believes financial institutions will win big in aggregation. They "will get permission to see consumer data, and in turn they will get permission to do additional business."
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