S1 Corp. and Yodlee Inc., which work together to offer online account aggregation services to financial institutions, say their recent signing of nine community banks shows there is still life in the technology.
This time around, however - among these banks at least - aggregation is being offered as a component of Internet banking, rather than as the stand-alone feature that larger banks had positioned it as a few years ago.
In 2000 and 2001, large banks such as Bank of America Corp., Wells Fargo & Co., Citigroup Inc., J.P. Morgan Chase & Co., and FleetBoston Financial Corp. signed up directly with Yodlee to offer account aggregation to customers, figuring that people who were able to manipulate all their financial accounts through their bank's Web site would become more loyal customers. But the service did not catch on in a big way, and ultimately was repositioned as a service aimed at private banking and wealth management customers, which is how some of the nine new bank customers plan to use it.
The banks that have signed licensing deals to integrate Yodlee-powered aggregation into their S1 online offerings this year are: Manufacturers Bank, a Los Angeles subsidiary of Sumitomo Mitsui Banking Corp.; Southeastern Bank of Darien, Ga.; Great Northern Bank of St. Michael, Minn.; Peoples Bank of Marietta, Ohio; Carroll County State Bank of Carroll, Iowa; Lee County Bank and Trust NA of Fort Madison, Iowa; Private Bank of Minnesota, Minneapolis; Savings Bank of Walpole, N.H.; and Umpqua Bank of Roseburg, Ore.
Adrian Danescu, the senior vice president and chief information officer at Manufacturers, said the $1.1 billion-asset bank will start offering aggregation in June, when it plans to introduce a wealth management product.
Mr. Danescu said his goal is for business owners and their managers and staff to use aggregation to monitor their investments, while he hopes to use data about their other financial relationships to cross-sell products to them. "I have more to gain and less to lose," he said.
Mr. Danescu said aggregation and similar technologies help level the playing field, given that his bank does not have the resources to develop them in-house.
Chris Colson, a senior product manager with Atlanta-based S1, said the community banks' enrollment is one sign that aggregation remains an attractive technology. When it hit the market four years ago, "people didn't understand the power behind it, and were concerned about the companies offering it," he said.
Yodlee and S1 say that about 10% of U.S. banks now offer aggregation. The American Bankers Association said that 6% of the 700 community banks they surveyed this year now offer aggregation, compared to 2.7% last year. The findings were published in this month's ABA Banking Journal.
Mike Matthews, Yodlee's director of marketing, said the Redwood City, Calif., aggregator had started out by selling its products directly to financial institutions, then started forming partnerships with companies like S1, which sells Internet banking software and services. Other partners include Corillian Corp., Digital Insight Corp., and Siebel Systems Inc. Yodlee bought the aggregation vendor VerticalOne Corp. from S1 in 2001.
Yodlee has learned that it is a "more scalable business for us if we find channel partners, and let them manage those relationships," Mr. Matthews said.
Chris Musto, a vice president of research at Gomez Inc. in Waltham, Mass., said the signing of the nine banks, announced Monday, "suggests S1 has followed the second-generation approach of integrating account aggregation into the online banking area."
Mr. Musto said when banks first began offering aggregation, "that generally didn't happen, and there were a lot of failed attempts" as a result.
John Kraft, an equity analyst at D.A. Davidson & Co., said the deals are an example of S1's positioning in the market, with the vendor targeting smaller and middle-tier banks that lack the resources to build their own aggregation and other services. "S1 is going to want to provide whatever features their clients ask for - the more services and features S1 can add to its offerings, the better," Mr. Kraft said.
