While account aggregation is one of the hottest services being offered online by financial services firms, few organizations are managing the technology themselves. Most are opting to use hosted models just to get their service up and running quickly.
But as aggregation technologies mature and standards emerge, more banks will likely look to bring the systems in-house to avoid perennial user fees and to increase control and scalability.
RBC Financial Group in Toronto recently started piloting its aggregation service with a select group of high-use, online customers after performing a two-month, in-house test of the service. The service itself is being hosted by CashEdge Inc. in Milpitas, Calif., the same company that hosts the firm's online banking service.
"We weren't really comfortable offering our customers a service on a third-party site where we were disintermediated and [the] third party might have access to our customer information," said Tom Wolf, RBC's senior vice president of e-business. But with CashEdge hosting both the bank's aggregation service and its online banking activities, he says, "you're behind the same authentication process you have for our online banking."
In the first two days that RBC's aggregation service was online, 320 out of 1,000 customers indicated that they wanted to try it. By the end of August, that number had jumped to 420.
Farming It Out
The vast majority of financial services firms lean upon aggregation service providers such as Yodlee Inc., S1 Corp. or CashEdge to host their aggregation sites. With about 80 percent of the market, Redwood City, Calif.-based Yodlee is the aggregation industry's 800-pound gorilla.
Ray Graber, a commercial banking analyst at TowerGroup in Needham, Mass., says banks overcame their squeamishness about the security of hosted sites and began jumping into aggregation through service providers because they feared being left behind as the industry began adopting the technology.
"My sense is that long term, as aggregation grows, it will be available from all technology providers as an on-site service," Graber said.
James Van Dyke, research director at Jupiter Research in New York, says the hosted aggregation model is still the most economical and fastest way for most financial services firms to deliver the service to customers. "My view is the ASP model works fine for general-purpose financial institutions banks and other companies where wealth management is not the priority. It's quick and relatively painless, and they can say we have it," Van Dyke says. "[But] if somebody wants to make it a core part of their offering, they should look at on-site models."
That's one of the reasons why Tom Cable, chief technology officer at NetBank Inc. in Alpharetta, Ga., chose to develop an in-house aggregation service based on technology from Palo Alto, Calif.-based Teknowledge Corp.
Cable says that by integrating the system with the bank's current online technology, it should be cheaper for the bank to host the system itself over the long haul because his company won't have to pay per-use or monthly fees that it would have to pay under a hosted model.
NetBank, which claims to be the largest online-only bank with US$2.2 billion in deposits and 230,000 accounts, used a clustered server architecture to build a database to house all of the aggregated information and to run a screen-scraping function, which gathers customer account information from other firms' Web servers.
"We went this route because it would give us better integration with our Internet package instead of just linking to someone else's site," says Cable. Besides, he adds, "it gives us more control. And we don't have to worry about a third party having that information and what they may do with it without our permission."