In a positive sign for online account aggregation, consumers are using an increasing number of institutions to manage their finances, according to a recent study by TowerGroup.
In a survey of 3,033 consumer households, 72% showed an interest in physically consolidating their accounts, at least in concept. Of those showing interest, more than half prefer their bank or credit union to be the aggregator.
Although current usage levels of online account aggregation are still very low, the Tower study projects the number of households using aggregation will explode from approximately 686,000 in 2001 to 4,536,000 in 2005 (57.8% CAGR).
To reach widespread acceptance, financial institutions will need to increase both consumer awareness and availability of the services. Only 26% of online households included in the study indicated they had heard of such services. Interest in adopting aggregation services was also lukewarm, with just 24% of consumers indicating they were very interested or somewhat interested.
Service availability is growing, but there are still many challenges to overcome. The technology for gathering data remains fairly unsophisticated. Because relationships haven't been established for direct feeds of information, many aggregators rely on screen scraping, where information is gathered using consumer passwords. However, there is active interest in the industry to improve the flow of data back and forth, and the Banking Industry Technology Secretariat (BITS) is working to establish standards for aggregating data.
"A lot of the larger banks have already put some offerings out," said Doug Andersen, program leader for delivery channels research in Tower's primary market research group. "What we're seeing now is some of the mid-sized banks starting to step into the water. But it's very early in the cycle for this product. It's by no means an established product."
An even bigger obstacle for financial institutions is figuring out how to pay for it. "We're seeing a more cautious approach in this area, with financial institutions targeting consumers they think will be more likely to pay fees," said Andersen. "The initial thrust right now is on advisory and planning services. Eventually cross-selling will be a big area."
Online account aggregation will be a standard offering in five to ten years, Andersen predicted. Because of that, all banks should get involved in discussions about standards. "Banks really need to be out there internally working with other banks to figure out what standards are going to work," he said.
Banks should also be educating customers on the benefits of online banking. In the study, interest in aggregation services was much higher among active users of online banking, 35% of whom had interest in aggregation. "If they're not willing to do electronic banking," said Andersen, "they're probably not ready to do aggregation."