Encirq, a San Francisco-based software firm, has come up with a new twist on the data aggregation theme: Let bank customers be their own aggregators.Instead of storing user data on a central server, the company's Java-based software maintains a database of account and transaction data on a user's PC.
Encirq's aggregation technology addresses concerns about privacy, security and intellectual property related to transaction data, said Mark Vogel, president and CEO of Encirq and a former director of online consumer financial services at Bank of America.
"All we've essentially done is removed the middleman," said Vogel. "We've moved all of the processing, all of the communication, and all of the reports down to the individual consumer's machine."
Yet banks are firmly entrenched into the Encirq equation. Although personal financial software packages such as Quicken also maintain a client-side transaction database that can be populated with data collected from online financial institutions, Encirq's encrypted database can only be accessed when the customer is securely connected to the Web site of the sponsoring bank. When not connected via a secure connection to the bank server, the database is effectively a "dead file," said Vogel.
The locally-stored, encrypted database will include passwords for other financial institutions' Web sites, addressing the oft-cited concern about the practice of giving private information to account aggregators. "An environment where consumers regularly give out the access devices-the user IDs and passwords-to a third party works against the definition of safety and soundness," said Vogel.
The bank's server will automatically provide scripts that instruct the consumer's Encirq software to go out and collect account data from multiple financial institutions and then load it into the local database. This process turns the centralized model on its head, in that passwords and transactions are not stored on any third-party systems.
"We can then integrate this account aggregation information with 'Illuminated Statement' services," said Vogel, referring to an Encirq technology that creates a "personal marketing network" for consumers. With Illuminated Statements, individual transactions on a bank or credit card statement can be associated with targeted advertisements from providers of related goods and services. "You can click on the merchant and go to the merchant's Web site," said Vogel. "In a brokerage context, you'll be able to click on securities and go directly to the investor relations section of the company Web site."
Bank of Hawaii, a subsidiary of Honolulu-based Pacific Century Financial Corp., is currently beta-testing the Illuminated Statement software. "It's been going extremely well," said Vogel. "The learning has been phenomenal, and the response of merchants in Hawaii has been great."
Cross-selling of financial services dramatically shifts under the Encirq model, as the sponsoring bank won't have direct access to transaction data from other institutions, even in the aggregate. Instead of financial advisors analyzing account data directly, they will have to provide portfolio analysis and financial services selection tools that customers can run by themselves against the Encirq database. Alternatively, customers could gather transaction data from the database for use by their own financial advisors or from a separate computer program.
Vogel expects that the privacy aspects of the software will appeal to wealthy customers. "Our research shows that the higher the net worth of the individual, the less likely they're prepared to let one party see all of their data if the one party is a broker in the transaction," he said. "There's a reason that high net worth individuals have multiple brokerage accounts."
Banks may also find the arrangement to their liking. "I've heard from some bank CEOs that have made comments to me saying, 'Look, I don't want to take the responsibility of holding or touching my customers' transactional data from other financial institutions, and I'm not comfortable with allowing or endorsing someone else holding my customer data,'" said Vogel.
Encirq is also working with credit card issuer JCB on a business plan for the Japanese market. The rollout of the account aggregation service will be in the first quarter of 2001.
COMPANY PROFILE: Offers a data aggregation model in which account and transaction information is stored on the user's PC instead of a third-party aggregator's server.
HQ: San Francisco