Getting and keeping customers has always been the name of the game in business. Now, thanks to Web aggregation, banks may have an even better way of generating customer loyalty.
Web aggregation is a system that collects a person’s financial account information from different Web sites and displays the information at a single site so the person can view everything at the same time, from account balances to the latest credit card charges.
Recently, directbanking.com, the online service of Salem Five Cents Savings Bank, launched its account aggregation program called OneView Service.
“We decided to do this because we felt this was a great service to customers,” said William H. Mitchelson, chairman and chief executive officer of the site, which has $100 million in deposits.
This service is the latest in achieving the company’s goal to improve its site, said Mitchelson. He is constantly in search of products which will attract customers, he said.
“The concept is called sticky portal: The more features you have on your Web site, the more likely people will use your site as their home page,” Mitchelson said.
The OneView project was launched in two stages. The first occurred two months ago and provided directbanking.com customers access to the aggregator, powered through a partnership with Yodlee.com. Two weeks ago, directbanking.com launched co-branded Web pages with the company, which is based in Redwood Shores, Calif.
“We think this is a mega-trend so we’re extremely comfortable,” said Mitchelson of being the first bank in the state to offer such a service.
Although it’s only the second bank in the country to offer financial Web aggregation, the industry has taken notice. Star Systems Inc., headquartered in Maitland, Fla., has published a white paper on Web aggregation.
“I think there are a lot of positives about Web aggregation service as far as more and more being available to the consumer in the marketplace. It allows the individual to have access to multiple accounts through multiple services,” said Nikki Waters, chief marketing officer and group executive vice president of Star.
From her San Diego office, Waters explained that officials at Star, an electronic funds transfer company that processes 2.7 billion transactions a year, are interested in Web aggregation because they feel it will become a part of every customer’s daily life in the not-too-distant future. Although transactions like fund transfers are not yet possible, they may be by 2005, according to Yodlee.
“We want to be part of that evolution and make sure those transactions are conducted safely and securely,” Waters said.
Mitchelson believes the bank has positioned itself at the forefront of a soon-to-be indispensable service.
“There’s a learning curve on the Internet. Five years ago no one would purchase anything [over the Internet] . . . We think this product will grow exponentially as there is information overload and password overload,” said Mitchelson.
‘Potential Risks’
After logging onto the aggregator site, consumers can supply a single password and access all their accounts.
In order for aggregation to work, the individual must give the aggregator passwords and account addresses for all the sites containing their financial information.
Because customers are entrusting account information to the third-party aggregator, banks must be certain to select a reputable service provider, Waters said. According to the Star survey, most consumers believe the third-party aggregator, the company powering the bank’s aggregation service, is subject to the same oversight and regulations as the bank is itself, which is not true.
“The rules are still fairly fluid and there are no regulations that would apply specifically,” said Thomas J. Curry, commissioner of banks for Massachusetts.
The Internet is one area where the technology and regulations are emerging at the same time, Curry said. However, aggregation services would be part of the examination process conducted by the division on banks. “We would be looking to see, if [banks] are engaged in this sort of activity, that they have addressed any potential risks associated with that activity,” he said, including misuse or inaccuracies.
A great deal of faith has been instilled in banks over time, said Curry, and it is up to them to leverage that history of trust.
There are three methods of collecting the data: screen scraping, direct feeds and downloads, said Jim Taschetta, chief marketing officer at Yodlee. Screen scraping involves copying and transmitting the screens containing account information of the individual back to the aggregator site. This can occur without the knowledge of financial institution holding the information.
Direct feed and downloading occur with the knowledge and consent of the financial institution.
“Let’s say I have a checking and savings account at Citibank and an account at Charles Schwabb for my brokerage account and an American Express card. Today you need to log on to all those Internet addresses. What we allow you to do is log on to our systems with a single sign-on. We will go out and bring back that information with a summary page containing all that information,” said Taschetta.
Inaccuracies can occur, said Taschetta, when the aggregator scans for the information from a credit card company to display for the customer and for some reason, the credit card company has changed how its Web site is laid out. If that occurrs, the fields the aggregator is programmed to look at are no longer there. For that reason, Yodlee conducts its aggregation through direct feed, screen scraping and downloading.
“We use a combination because you need a combination to provide a more robust solution,” said Taschetta. Alone, none of these methods are complete, he said.
Ethical Hackers
Because consumers see the service as offered by the bank, it is critically important any bank offering such a service absolutely trusts the third party aggregator, said Taschetta. He recommends the bank perform due diligence and ask questions of the company it is considering partnering with.
“It needs to be a good product, first and foremost. Is it secure? Banks are going to be putting their reputation on the line when they go into this. They need to do some pretty heavy technical due diligence . . . They need to look at the entire information change from how the information is collected to how it is passed on [to customers],” said Taschetta. “You need to have a high degree of confidence that this information is not going to be passed on [to outside parties].”
Salem Five itself is not privy to the information aggregated, said Mitchelson. And they don’t want to be. “We never get to see what is being aggregated. One of the arrangements we have with Yodlee is individual information is not shared,” said Mitchelson.
Privacy of customer information is another important area to ask questions about, said Taschetta. Banks want to know how the information will be dealt with and make sure the aggregator is just as scrupulous as the bank in protecting customer information.
In Yodlee’s case, the information is transmitted encrypted and stored encrypted. They hire “ethical hackers” to try and crack their system to show the company where it needs to work on its security, said Taschetta. He feels the company needs to show banks that it has a higher security standard than the banks do in order to be considered for partnership.
Reliability of data is another important factor to look into, he said. “Does the data come back reliably a majority of the time? The information needs to come back and it needs to be very reliable,” he said, because customers will make decisions about their financial net worth as well as purchasing decisions based on the service.
Finally, the bank needs to make sure the company can provide enough information or “breadth of content,” Taschetta said.
“If you truly want to be able to do wealth management in general, you need to be able to provide access to a majority of sites,” he said.
“What the game is about today is value-added services. With the advent of the Internet it’s much easier for consumers to [shop around]. The day of a captive audience is no longer there,” said Taschetta.
Banks may choose to offer services right on the site, according to Taschetta. If a customer chooses to ask for wealth optimization, the program may recommend applying for the bank’s credit card which has a lower fee. There are a number of potential services, from loan application to recommendations on debt payment, which can be offered to the customer, said Taschetta. Funds transfer is still in the prototype stage, but Taschetta sees that service being offered within the decade.
“Banks need to make a decision about how serious they are about moving into the 21 century Â… how do they want to be known to their consumers,” he said.
