Account Aggregation Is Still Ahead of Its Time, But It’s Expected to Grow Rapidly
If you haven’t heard of account aggregation, you soon will.
Account aggregation allows you to keep all your financial information in one place electronically--typically on a Web site. Financial institutions, including Citigroup Inc., Wells Fargo & Co. and Merrill Lynch & Co., have rolled out account aggregation features, and millions of us are expected to use this Internet technology within the next few years to track our money.
The benefit to the consumer is supposed to be simplicity, convenience and, someday soon, the ability to easily transfer money from account to account--regardless of financial institution boundaries.
Unfortunately, like so many Internet ideas, this one is ahead of its time. Smart consumers should be careful about exposing their financial selves on the Web until various security and privacy concerns are settled.
Account aggregation seems tailor-made for busy people who are trying to track and tie together all aspects of their financial lives. An electronic robot uses the passwords you supply to visit your credit, brokerage and bank accounts, download your recent transactions and balances, and upload them back to the aggregation site.
Some account aggregators add bells and whistles, such as the ability to track travel reservations, consolidate e-mail accounts and monitor frequent-flier miles, among other services.
So far, not many people know about account aggregation. About 250,000 people use it to organize their finances, compared with the 5 million or so that use online bill-paying, according to Forrester Research Inc., a Cambridge, Mass., consulting firm. These early adapters are typically looking for convenience and access to their data from multiple locations.
“It’s so new, it’s hardly registering on consumers’ radar,” said Paul Jamieson, senior analyst for banking and payment services for Gomez Advisors, a financial services and Internet research firm. “It’s basically just a blip.”
Aggregation’s anonymity isn’t expected to last. Citibank announced last week that 2,000 people were signing up each day for MyCiti, its account aggregation feature, and most major financial institutions are either planning to add aggregation or already have sites up and running.
Forrester analyst Kenneth Clemmer says the market for account aggregation will grow to 3 million in the next three years and 8 million by 2005. Gomez estimates the number of potential users at 20 million to 30 million.
The reason that account aggregation is expected to take off is that banks and brokerages--which a year ago feared and even fought this technology--have suddenly smelled potential profits.
Financial institutions want to use the information you supply to offer you more products and services. Citibank, for example, might see that you have a credit card balance with Bank of America and offer you a teaser rate to transfer the debt to a Citibank card. Morgan Stanley Dean Witter plans to e-mail or call customers that use its NetWorth service--which will give the brokerage a glimpse of portfolios held at other firms--to suggest investments.
Computer-savvy consumers are expected to bite because account aggregation helps them keep track of their increasingly complicated financial lives. Jamieson likens the situation to what banks were facing in the early 1980s, when automated teller machines were introduced to initial consumer resistance.
“If you look at today’s consumers, they want to simplify their lives, save time and reduce their stress,” Jamieson said. Account aggregation in the early 2000s, like ATMs in the 1980s, will become “a better way of doing what they’re doing,” he said.
Of course, you don’t have to let your bank know all your business. Internet portal sites such as Yahoo, AltaVista, iVillage, Quicken.com, MoneyCentral.com and CNBC.com offer account aggregation. Yodlee, which provides the account aggregation service used by many banks and other sites, also offers a stand-alone service on its Web site.
Still, several key issues have yet to be settled. There are no security or privacy standards for account aggregation, and no agreement on which government agency, if any, will regulate the services.
The Federal Reserve is still trying to decide whether third-party account aggregators--those not providing services on behalf of a bank or brokerage--are subject to regulations ensuring the financial security of Internet transactions. These issues make it unclear who would be responsible if a hacker tapped into financial information stored on a Web site.
This leaves consumers in an uncomfortable position. They can choose account aggregation with their bank or brokerage, and be subject to that institution’s snooping and product pitches. Or they can go to a nonfinancial site and enter an unregulated Wonderland.
Some account aggregation sites promise not to sell or share users’ data. Those concerned about privacy should carefully read a site’s disclosures before using the service.
There’s a third option for users of personal finance software. The 2001 versions of Quicken and Money software give you the ability to aggregate all your financial account data on your own personal computer. It’s almost as convenient as using the Web sites, with an added level of security--because the information stays on your desktop rather than floating out in the ether somewhere.
The downside is that unless you take the aggregation a step further--by uploading it to the Quicken or Money Web sites--you’re not able to access your data wherever you happen to be.
Until account aggregation works out its kinks, however, that’s an inconvenience most of us can and probably should live with.
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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times’ Web site at https://www.latimes.com/moneytalk.
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Online Finance
More than half the nation’s 102 million households have at least one computer, and about 46% have an Internet connection. But relatively few households use online financial services, and only a handful use account aggregation, which allows them to keep all their brokerage, bank and credit card information in one place--typically on the Web.
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Number of households Percent of all (in millions) U.S. households Online 47.00 46.0% Bank online 11.00 11.0 Trade securities online 5.00 5.0 Pay bills online 5.00 5.0 Aggregate accounts online 0.25 0.2
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Source: Forrester Research Inc., Department of Commerce
