To this point, online banking customers have enjoyed using the Internet as an additional channel, but research by Datamonitor suggests that account aggregation can become the online one-stop shop for financial services.
Datamonitor found that 49 percent of online banking customers will be managing their affairs using an account aggregation service by 2005, when there will be 121 million online banking customers in Western Europe and the United States.
The consumer appeal of account aggregation rests on the convenience of being able to manage different financial relationships from a single Web page through PCs, mobile phones and wireless devices. Access to the service will enable customers to transact online between several accounts, regardless of how many banks these are spread over, make online bill payments and check portfolio performance.
Banks will be the key beneficiaries of the account aggregation wave. Those that can deploy a robust, secure and reliable service are in an ideal position to leverage existing customers for increased cross and up sell opportunities resulting from aggregated consumer data from all the users’ accounts and a deeper personalized relationship between bank and consumer, Datamonitor found.
The research also found that the uptake in account aggregation services will be driven by concerns to maintain competitive equality on the part of the banks, coupled with the drive to be first to market. The majority of growth will occur between now and mid-2003.
While the majority of aggregation services are based around an outsourced model, Datamonitor predicts that banks will move the development and deployment of aggregation services in-house. As more non-financial services firms such as utility companies, Web portals and other lifestyle sites jump onto the aggregation bandwagon, banks will feel the squeeze as consumers source aggregation services from portal-type sites that have strong brand, vast consumer bases and extremely sticky product offerings.
The European account aggregation market presents a real opportunity for IT vendors that can rollout a secure and robust service. The significance of the arrival of aggregation in Europe is emphasized by the fact that IT spending in Europe will outstrip U.S. growth at rate of 93 percent compared to just 20 percent in the United States. The home market for account aggregation has traditionally been in the United States, as this is where the key vendors were founded and are currently based. Because account aggregation is already an established concept in many large U.S. banks, significant capital expenditure has already been sunk.
According to a study by Gomez, Inc., account aggregation is gaining momentum, but significant changes need to occur before widespread consumer adoption is achieved. The Gomez study identified key elements that enhance aggregation usability and improve the overall consumer value proposition, but also points out key stumbling blocks to its widespread adoption.
“For firms to succeed, they will need to provide advanced analytics and transactional functionality that in turn will depend on robust data collection,” said Paul Jamieson, director of banking and payment services at Gomez. “Today, few if any are doing so.”
The study also found that consumer awareness, data collection methodologies, security and privacy concerns and integration with trusted financial relationships all remain challenges:
- Only 13 percent of online users are aware of account aggregation, though 19 percent express interest once informed of what these services provide.
- Screen scraping, the most widespread data collection approach, poses risks due to poor data integrity, limited historical information and the lack of an audit trail. Gomez found that although industry initiatives are currently addressing these issues, consumer demand for data integrity will ultimately determine the fate of screen scraping.
- After awareness, security and privacy concerns are the most inhibiting factors to interest in aggregation. However, such concerns will erode as firms better promote security inherent in their offerings.
- Over 25 percent of consumers are likely to embrace aggregation when it is sponsored by their primary bank and integrated into the bank’s overall offering. Further, 28 percent of high net worth investors are likely to switch institutions if their firm does not offer aggregation services.