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Financial Services Data Aggregation

The race to deliver aggregated account information is on.

A Contributed Piece by Bruce Benson, Principal Consultant, Silverline Technologies

The end result is rather simple and easy to comprehend: Customers need all their financial information in one place so they can use it effectively. The race is on to deliver. People have a wide variety of financial records typically scattered across multiple financial institutions. Most people have a checkbook and savings account at a bank or credit union. They may have a CD or two at the same bank or perhaps a different one. They may have a loan, mortgage or some other debt at the same or different institutions. There are credit cards galore issued by just about every financial institution, club, group, long distance company or football team. Investments options include 401(k) plans, stocks, bonds, options and annuities. Other key investment components include insurance policies.

How is one supposed to keep track of all these investments from all these institutions? Help for the beleaguered investor is coming in financial services data aggregation.

Financial services data aggregation brings information from many organizations and institutions together into one place. Three different places have emerged as candidates for doing the integration: The financial institutions themselves, at an independent aggregator and at the customer's PC using Personal Financial Managers (PFMs). If one institution can provide a wide range of services, that institution can by the very nature of its expanded offerings provide aggregation services. What's more, the regulatory barriers that separated banks, brokerages and insurance companies are collapsing with the recent signing of the Gramm-Leach Bliley Act into law.

As regulatory barriers dissappear, mergers are on the way. For instance, Chase purchased JP Morgan, UBS AG purchased PaineWebber, and Credit Suisse First Boston bought Donaldson Lufkin Jenrette. As institutions get larger with a broader spectrum of products, they have the value-added benefit of providing common statements and common points of access to large numbers of financial services.

Many financial institutions provide on-line access to financial information. Users need to keep logins, passwords and Web addresses for each institution. Then, they can access their data one institution at a time.Upon access, they can write down or print out the relevant Web pages. Then, they can compile the information as they see fit.

Account aggregators allow consumers to view their holdings and information at multiple financial institutions at a single location on the Internet. With a Web account-aggregation service, customers provide the aggregation service with their different financial institutions logins, passwords and accounts. The aggregators perform the tasks previously performed by an individual behind the scenes. The service logs into the aggregation service on behalf of the customer and gathers the data. The customer can view their accounts as unified reports and charts.

Besides accumulating data, aggregators deliver content to the client via PCs, PDAs or cell phones. They display the content in the most useful format including charts showing activities and balances. Additionally, they provide reminders to clients of bills that need paying or alert them to events such as balances getting low.

Over 4 million people have decided to take matters into their own hands and integrate their financial data on their PCs using a Personal Financial Manager (PFM). The most common PFMs are Quicken and Microsoft Money. With a PFM, users can gather their accounts into their PC. Users can balance their checkbooks, pay bills easily, bank online, track investments, view reports and graphs and optimize their spending.

A big problem facing PFM users is getting the information into the system. The basic method is to take paper account reports from the financial institution and type them into the PFM. Many institutions have helped by providing PFM download options on their Web sites.

There is a natural tension between the three approaches. Financial institutions see providing multiple services and common reporting as a marketing edge over their competitors. Aggregators remove that advantage. Aggregators see PFM users as having solved the problem to some degree and possibly not candidates for their service. PFM advocates may not see a reason for using one large multi-service institution or an aggregator.

The different approaches need not be mutually exclusive. Financial institutions are now partnering with aggregators to provide more efficient access to data. In a like manner, aggregators can work to integrate with PFMs to provide more efficient downloads or to gather information that is not available via an automated download. Aggregators can provide PFM users with data and alerts to their mobile computing devices.

All three approaches will learn to coexist. Financial institutions will continue to merge and broaden their product lines. Aggregators will fill the niche of pulling information together and delivering added-value presentation and delivery benefits, and PFMs will continue to appeal to their growing base of customers.

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