AGGREGATION MODELS A TOUGH SELL OUTSIDE THE U.S.

Account aggregation services appear unlikely to follow the United States model in foreign markets, according to industry observers at the Retail Finance Europe 2001 conference in London.

Indeed, even in Australia--the country that most closely resembles the U.S. in terms of financial structure and Internet use--sites offering account aggregation services still haven't drawn significant traffic. For example, Macquarie Bank started an account aggregation service in September 2000, but as of yet has only signed up 5,000 users, most of who have been merely experimenting.

The slow adoption might be a result of how banks are perceived as Internet service providers in the marketplace. "Banks are very much disliked and very much distrusted in Australia," said Robert King, former CEO of the Financial Enrichment aggregation service of Macquarie Bank. "There are a lot of people that want an independent provider, not a big bank."

The technology itself might also act as a brake on growth. King describes the current crop of aggregation tools as "a second-rate solution to a problem most people don't have."

But King also said that it would be very risky for banks to be caught without an aggregation service when the technology comes around to better meet consumer needs. He then used a weapons proliferation analogy to describe how aggregation is likely to spread amongst banks: first each bank builds the "nuclear bomb" of aggregation, followed by bilateral talks and eventual disarmament.

But the United Kingdom seems likely to ban the aggregation bomb altogether. The Financial Services Authority (FSA), the U.K.'s banking regulator, warned the banking community last week of possible regulatory and legal difficulties involved with screen-scraping, which entails the use of customers' account names and passwords to gather information from other organizations.

This uncertainty surrounding aggregation practices has effectively bottled up plans for imminent rollout. For example, Virgin Bank, despite having received indications of interest from consumers, recently decided to delay the introduction of its account aggregation service. "There's a massive amount of talk about aggregation services, but nothing's happening," said Martin Davis, managing director of Corillian International, U.K. "The jury's still out."

But Corillian isn't sitting still. While the company resells Yodlee's account aggregation service in the U.S., the market in the U.K. is as different as cricket is to baseball.

Corillian and Unisys have established a joint venture to create a "utility" to intermediate between banks and their customers. The service would provide a real-time integrated feed between the centralized utility and member banks for the exchange of customer and account data. The utility model allows the financial services industry to retain control of customer data rather than relinquishing it to independent aggregators.

Unisys would manage the utility, while Corillian would provide its "OneSource" aggregation product, which had been effectively shelved in the U.S. due to Yodlee's market dominance.

Microsoft plans to add its imprint to the market. "Aggregation is an extremely good example of what Microsoft sees the next generation of the Internet becoming, and that's 'web services,'" said David Slight, industry manager of financial services marketing for Microsoft, U.K.

The Microsoft ".NET" initiative centers around web services that allow programmers to use an "evolved protocol" to knit together various data sources and program components. The protocol will allow for automatic negotiation between information providers and content aggregators, for conditions such as guaranteed service levels and data exchange limitations. Links between .NET customers and multiple .NET financial institutions may be easier to develop, deploy and integrate into an integrated computing environment for consumers.