Yodlee Inc., the online aggregation vendor, is developing a system for consumers to move money among their accounts at different banks and brokerages.
A handful of major banks already provide such services, which they offer for free.
Yodlee’s version, which it is developing for banks and brokerages to offer, is to be based on an account funding service it introduced last April. The money transfer service may be available by next April, said Shailesh Rao, the product manager in charge of funds transfer strategy for the Redwood City, Calif., vendor.
Citigroup Inc. and E-Trade Financial Corp. have offered bank-to-bank services for some time. Bank of America Corp. and Wells Fargo & Co. are adding them to a service developed for customers to transmit funds to other people’s accounts at the same bank.
Those four banking companies claim to have 20.4 million online banking customers. That is about 43% of all online U.S. banking customers, data from Forrester Research Inc. of Cambridge, Mass. and NetRatings Inc. of New York suggest.
The rest could also benefit from account-to-account transfers, and Yodlee’s system could be more flexible than what banks now offer, Mr. Rao said. The basic ability to move money and manage risk makes other kinds of transactions, including person-to-person money transfers, possible, he said.
Yodlee’s service is based on its Instant Account Verification system, which banks use when customers want to open accounts online and fund them immediately. Customers provide their online banking password for an existing bank account; the new bank uses that password to verify identity.
Mr. Rao said Yodlee plans to outsource the job of transferring money over the automated clearing house network. Payment Data Systems Inc., a San Antonio electronic payment processor, issued a press release Dec. 3 saying it had been chosen for the job, but Mr. Rao said it is one of several contenders.
Eventually the service will support transfers between customers at different banks, but that feature will not be offered at the start, he said. He would not say when it might be added.
But though Yodlee’s service will initially mirror the existing services, it could have wider potential because customers will have to give Yodlee the passwords to their accounts at other financial companies, Mr. Rao said. This could, for example, enable Yodlee’s system to automatically determine if funds are available in accounts from which customers request transfers, he said.
But some in the industry have long warned of security dangers in a system that requires customers to divulge passwords.
Banks have also worried about a business danger, “that all of the money was going to move out and not in,” said Penny Gillespie, a senior analyst at Forrester.
But giving customers an easier way to move their money could be exactly what they want, and therefore would make them more loyal, Ms. Gillespie said.
Banks have forced them into convoluted processes for transferring money, she said, but “the demand is actually there” for something simpler.
