Account Aggregation Hangover

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After an initial outcry about protecting the privacy and security of data, over the last 18 months many banks and other financial services companies rushed to implement and incorporate account aggregation into their Internet offerings. Indeed, every major financial institution now offers, or is planning to offer, account aggregation functionality. Such is the competitive power of the herd that last July, even after scathing reports by Forrester Research and Jupiter Research decrying the long-term business viability of account aggregation, Bank of America announced that it would be the lead investor in a new round of equity funding for aggregation service provider Yodlee Inc. - the dominant technology vendor in the field. Like the digital wallet fever of 1999 that caused many financial institutions to leap before looking closely, account aggregation is now on the verge of becoming a white elephant for companies that do not plan properly and provide good, well-considered reasons for investing in continued development. Financial services providers must first figure how account aggregation supports their overall business objectives and how it will integrate with existing customer relationship marketing. Many larger banks and financial institutions initially rushed into developing account aggregation with the hope that if they could find out enough about their customers' complete financial pictures, they could begin to make relevant cross-sell offers that would strengthen ties with consumers. But woe to the financial institution who would consider account aggregation in its current incarnation as a solid platform for CRM, for the following cautionary reasons:
  • There are differing opinions on the reliability of customer data gathered through the current "screen scraping" technique used by most aggregation technologies.
  • Best privacy practices dictate that customers will need to be convinced of the value of making their most private financial information available for marketing purposes before opting in to data sharing.
  • Early indications on actual usage of many aggregation services among customers who have registered for them are discouraging - especially if a financial institution's goal in providing account aggregation is customer retention.
  • The functional features that aggregation would seem to promise, such as funds transfer and management across multiple institutions in a single environment, are not possible - users need to leave the account aggregation environment to conduct secure transactions at individual financial sites.
Before proceeding with or deepening its investment in account aggregation, here is a checklist of questions that a financial institution should ask itself:
  • Which of my customers (would) use account aggregation and why?
  • What do my Internet-enabled customers value most in an online relationship?
  • What is the reason I am providing customers for linking multiple accounts in one place?
  • Have I done the things required to build the confidence for them to do this?
  • What are the clear benefits -- beyond convenience -- that my customers (will) get from account aggregation?
  • How can I determine the value of a customer who registers for account aggregation?
  • If cross-selling is my objective, how will I collect and mine the data for those customers who allow me to do it?
  • Can I legitimately claim to be a one-stop financial services shop? If not, am I ready and able to advise my customers based on their aggregated information?
  • How will I integrate account aggregation capability with my primary relationship channel?
  • What systems are in place or need to be developed to operationalize cross-selling of services?
Providing account aggregation as part of a long-term business strategy should force financial institutions to focus on what their customers want and, at the same time, to look in the mirror to reaffirm their own identity and service offerings -- and determine how aggregation can best support those offerings.
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