Web-based account aggregation services are hot. A number of online financial services firms, including some of the biggest banks, brokerages and content providers, are helping customers consolidate their financial information.
And we do mean all information. These services collect online account information from banks, brokerages, credit card companies, bill-paying services and frequent flier programs to produce one consolidated statement. The user accesses the information with just one ID and password. The services will also aggregate multiple e-mail accounts and sometimes allow customization of news, weather, sports and shopping.
In a matter of months, Citigroup, CNBC, America Online (including, eventually, Netscape's Netcenter and CompuServe), Smart Money magazine, the Women's Financial Network, OnMoney.com and AltaVista have all launched an aggregator service.
Coming right up are Chase Manhattan's Chase.com, which is planning a launch sometime this fall. Merrill Lynch is aiming for a year-end debut of an aggregator for its clients with online access, according to Frank Zammataro, senior director of eAlliances, eInvestments and portals.
The technology and the companies operating the service are new. The process is somewhat controversial and has limitations. But the day when account aggregation is a standard offering is well within sight.
Scraping for Data A new technology called "screen scraping" makes account aggregation possible. Yodlee and VerticalOne are the major players in screen-scraping technology (see "Yodlee and VerticalOne," Page 76).
Here's how it works. Once the consumer has provided access to account information, providers log and extract--or "scrape"--the relevant balance and transaction data from each online statement. The services then transfer all of the data to their own statements.
From the consumer's point of view, the result looks simple--a nice clean statement. But the technology that produces it is quite complex and requires a fair amount of human input. The scraper's software has to be able to locate the right information in the right place on a Web page. The process is tricky because Web sites and online account statements are constantly being redesigned. If the location of, say, the total value of a brokerage account changes, the aggregator's system might have trouble finding the right number in the new spot.
All of the aggregators have automated scripts that can adjust for simple changes. But for more complex changes, a programmer has to look at the page and designate the right information.
"Screen scraping is fragile because [links] can be broken," says Brook Newcomb, a senior analyst at Forrester Research in Cambridge, Mass.
Consumers need to be made aware when data is incomplete or missing, says David Weild, president of PrudentialSecurities.com. "You don't want to put people in the position of making important financial decisions based on an illusionary promise that they're dealing with complete information," he says.
Consumers may not be able to get everything they want either. Since the pages have to be mapped out before a site can be added to an aggregator's service, the number of eligible sites is still relatively small. But vendors' lists are growing rapidly.
As of late July, Yodlee's eligible sites numbered just 400, but it expects to have 4,000 to 5,000 sites by year-end, including mutual fund and utility company sites, says Melanie Flanigan, director of marketing communications.
VerticalOne, as of July, had a count of about 1,400 sites and was adding more weekly, according to Sandra Dunn, vice president of marketing.
All of the aggregation services are currently being offered free of charge to consumers. Sponsors foot the bill. A financial institution may pay a per-user fee, while a portal like AltaVista would have some sort of revenue-sharing model.
Attracting Consumers Aggregation is "really a tremendous time saver for time-starved consumers," says Bill Mitchelson, CEO of Salem Five Cents Savings Bank in Salem, Mass., whose online banking site--directbanking.com--was one of the first Internet banking services back in 1995. Salem Five Cents is also a Yodlee client.
"In order to have a Web site that is successful, you have to have features and functions that bring people back to it," Mitchelson says. His bank's service also allows people to customize weather, news and sports.
So far, the bank's aggregator service gets about 25 new users a week, but Mitchelson expects the number will increase to about 100 a week in the fall, when the bank launches a second, co-branded version of Yodlee's service. He predicts that aggregation will become a "very predominant service in the next year or so."
Consumers are looking for this type of technology because of its "simplicity and ease of use," says David Theis, an America Online spokesperson in Dulles, Va. AOL's service can be found at keyword "myaccounts."
Margaret Baryk-Masella, Chase Manhattan's vice president for national consumer services, joins the refrain: "Customers clearly want a holistic view of their accounts. Our research has proven that out."
Screen scraping, the current technology used by aggregators, has flaws. So Wall Street has not been as quick as other institutions to offer aggregation services.
Open Financial Exchange, known as OFX, is generally regarded as a better means of collecting data from financial institutions than screen scraping. The OFX project was started in January 1997 by CheckFree, Intuit (which owns Quicken and QuickBooks), and Microsoft, in combination with a number of financial institutions and technology companies. The goal is uniform specifications for exchanging electronic financial data over the Internet.
Rather than banks and brokerages hiring third parties to scrape one another's Web pages, OFX would enable institutions to query one another for customer account data. Data would be transferred electronically and downloaded directly into Quicken, QuickBooks or Microsoft Money, making for a more seamless and error-free process.
The number of OFX servers is now up to 49, says Steve Holoien, director for the corporate partner development group at Intuit. "There's been an explosion of OFX connectivity in the past year," he says.
OFX is coming, but the majority of financial institutions still don't support it, says Brook Newcomb, a senior analyst at Forrester Research in Cambridge, Mass. Therefore, the question for institutions is: "Do you wait until OFX is available, or do you go with an inferior technology [screen scraping], which is available today and lets you get to market?" Newcomb asks.
Morgan Stanley Dean Witter and Prudential Securities are waiting, at least for now.
"OFX is definitely superior technology and really should be everyone's longer term goal," says Sandy Motusesky, MSDW's manager of interactive marketing. "Screen scraping seems to be such an interim solution."
MSDW is in the process of building an OFX server. "It is not an easy task," Motusesky says. Smaller institutions may never offer OFX downloads, so screen scrapping may be a part of the solution, she says.
That's why MSDW has been talking with both Yodlee and VerticalOne. But as of mid-July, the brokerage still hadn't done a deal with either. Security concerns have been resolved, but cost is still an issue.
Yodlee's per-user charges were pricey, Motusesky says. "We expect that many people will take advantage of [the service]," which would drive up the firm's costs.
Likewise, Prudential Securities is still evaluating technologies for aggregation. The firm might use OFX in lieu of screen scraping or some combination of both, says David Weild, president of PrudentialSecurities.com.
"I do think that [aggregation] is a good technology for the consumer long term," Weild says. "There's a clear interest in pulling it all together in one place. It's an enormous convenience."
Account aggregation services could be useful tools for brokers managing client data. But so far, the services aren't set up to give advisers access to the statements.
Under the basic agreement between the user, vendor and the site sponsor, the client is the only one who has access to his or her aggregated statement. Users can "opt-in" to grant access to the site sponsor, says Melanie Flanigan, director of marketing communications at Yodlee, a leading aggregator service.
But site sponsors "are treading fairly carefully in terms of privacy and access," says Brook Newcomb, a senior analyst at Forrester Research in Cambridge, Mass.
Bill Mitchelson, CEO of Salem Five Cents Savings Bank in Salem, Mass., which offers an online banking site with account aggregation, says the bank purposefully does not inquire about other accounts. "It's a comfort to the consumer using this that we will not have access to all of their financial information," he says. "Only they will."
For a good example of a consolidated statement, look on Citigroup's new aggregation site for consumers, www.myciti.com, launched July 18.
The Citigroup sample shows fictitious bank balances from accounts at Citibank and Wells Fargo, data from charge cards, an E*Trade account, and other bills and rewards programs.
Each account entry has an "auto login/link." These links allow consumers to log on to both Citigroup and non-Citigroup sites to conduct a transaction--without having to enter IDs or passwords.
The statement also shows when each balance was last updated. Users can get updates by clicking the "refresh" button.
To use an aggregator service, a consumer has to provide all IDs and passwords to the outfit doing the data collection. The financial institutions being scraped are not involved. They cannot tell if it's the consumer or scraper accessing an account.
When banks started to realize that the aggregators were storing their customers' IDs, passwords and account numbers on third-party servers, it "struck a chord of fear" about breeches in security, according to report by Celent Communications, a consulting firm in Cambridge, Mass.
"Since the financial institution has absolutely no control over the aggregator, the risk of user names and passwords falling into the wrong hands is a grave concern," the report says. In a survey of 20 chief information officers at top banks, Celent found that screen scraping had become their No. 1 concern in the six to nine months prior to the March 2000 report.
"If something goes wrong, who's liable for it?" asks Brook Newcomb, a senior analyst at Forrester Research in Cambridge, Mass. "If a hacker gets my user name and takes money out of my account, do I look to the underlying financial institution to get my money back? There's not a lot of precedent for who's liable in that case."
Account consolidators Yodlee and VerticalOne downplay those fears.
Melanie Flanigan, director of marketing communications at Yodlee, says the firm's data centers are closely monitored 24 hours a day, and that the data is encrypted at all times. Companies such as Chase and America Online have "come in and done extensive due diligence on all levels of our architecture," she adds. They have "validated" the firm's security measures.
Sandra Dunn, VerticalOne's vice president of marketing, argues that the safety of data sharing has been proven by S1 Corp., VerticalOne's parent firm. S1's online banking technology is used by the top 40 financial institutions in the world, including Bank of America, Citigroup and Chase, she says. The systems are highly regulated and move trillions of dollars in bank deposits, Dunn says.
Nevertheless, privacy fears may be keeping the number of aggregation users small for now. David Weild, president of PrudentialSecurities.com, notes that most consumers don't know who Yodlee or VerticalOne are. He says, "Personally, I would not give my PIN number to a unregulated entity unless I was extremely clear on what the security protocols were."
One of the first banks to realize the possible fraud risks with account aggregations was Charlotte, N.C.-based First Union. In fact, First Union actually sued one of the aggregators, Secure Commerce Services.
That claim has since been dropped. The bank is now working with a number of aggregators to address concerns about privacy and security, says Christy Phillips, a First Union spokesperson. And the bank will even be offering its own service by year-end.
First Union was concerned that customers weren't aware the aggregators were accessing their accounts and may not have been "fully informed as to the security and privacy risk," Phillips says. The bank was also worried that customers thought First Union knew what aggregators were doing and therefore had a false sense of security.
First Union Director of Consumer Advocacy Gayle Wellborn is now co-chairing a task force on screen scraping. The task force was set up by the Banking Information Technology Secretariat in Washington, D.C.
The task force is "evaluating options for controlling and monitoring screen-scraping activities," Phillips says.
Yodlee and VerticalOne are the big players in screen scraping.
Redwood Shores, Calif.-based Yodlee has partnered with Merrill Lynch, Citigroup, America Online and Chase. Yodlee started up this past January and has its own aggregation service as well called "My Yodlee." The firm is privately owned, although Merrill has an unspecified investment. According to an unconfirmed report in The Industry Standard magazine, AOL and Chase are also investors.
CNBC, OnMoney.com, SmartMoney.com and the Women's Financial Network are working with VerticalOne. VerticalOne, based in Atlanta, went live with its aggregation service in August 1999, says Sandra Dunn, vice president of marketing.
VerticalOne was acquired by the S1 Corp., also of Atlanta, this past November. S1 is a major vendor of the technology that enables Internet banking, giving VerticalOne more of a presence on the banking side.
According to a March 2000 report by Celent Communications, a consulting firm in Cambridge, Mass., VerticalOne's aggregation service had "substantially more" users than any other--about 50,000.
Dunn says users total 150,000 as of July and have more than 1 billion dollars in combined assets. The average account holder aggregates three or four accounts, though some gather as many as nine. About 11 percent use the service for bank accounts and 15 percent for investment accounts, she says. The firm doesn't know how many consumers use the service for both, but Dunn says the average brokerage account on its system has a balance of around 130,000 dollars.
The aggregator firms are already working on their next-generation services. "The next stage will be value-added applications and services," says Melanie Flanigan, Yodlee director of marketing communications. She expects users will be able to calculate net worth or be alerted five days before bills are due. Some applications will be built by Yodlee, others by its clients.
"There will be a whole suite of really cool applications that will help people better manage their entire financial lives online and make smarter decisions," Flanigan predicts.