Account aggregation allows consumers to view and access all their online financial accounts from a single screen with one log on. This means a consumer can not only view their online current account, but they could also view their online mortgage credit card, savings and loan account ‘ no matter who the provider is.
At the centre of an aggregation service is the ability to harness the value the internet generates in helping customers take control of their finances. It adds further value by drawing all the accounts together to help manage them more easily and effectively.
Account aggregation is a relatively new concept in the UK, with few providers offering the service. However, around the world, account aggregation has taken hold. In the US over two million consumers now view their financial details using a single website and according to market research firm Datamonitor, 35 million Europeans will be using account aggregation services by 2005.
Account aggregation is a real breakthrough in terms of ease of use and efficiency for consumers keen to manage their money online. Instead of remembering several different passwords and customer IDs, and visiting different websites for each product provider, a consumer’s full financial position can be viewed from one page ‘ requiring just one log in process.
Account aggregation has received opposition from many of the high street banks. The opposition stems from legal and security issues. They argue that because customers have to give their individual passwords when first inputting their details, they are contravening their terms and conditions.
There are currently two models of aggregation: server driven and user driven. The former requires the customer to hand over their security details to the provider, whereas the user driven model stores passwords encrypted on the user’s desk top.
The user-driven method avoids many of the legal issues associated with account aggregation. It works not by scrapping account information, but by updating it each time the customer logs on to the service. Passwords are unlocked from the desktop and sent to each relevant product provider where they log on to the customer’s account.
Behind much of the defence from the big product providers is the fear of losing the interface with their customers, and the potential of the aggregator to then cross-sell to them. The nature of account aggregation means that these customers tend to be more affluent than average, which only adds to provider’s desire not to loosen their grip. As a rough breakdown, aggregators tend to earn above-average salaries, have above-average assets (ABC1s) and hold a wide range of internet products which are generally best of breed. They are also financially literate.
However, history tells us if customers want a service and cannot get it from their existing provider, rather than going without, they vote with their feet. Recent research by MORI revealed 83% of those who bank online would be interested in using an account aggregation service.
The industry’s traditional providers are clutching at straws to look for the worst implications for account aggregation. The reasons consumers will want the service is that it adds value to their existing online products, the reason the existing aggregation providers are offering the service is because it increases loyalty among their own customers. The ability to cross sell products comes considerably further down the ‘reasons why’ list, aggregators tend to already own best of breed products and are therefore likely to buy more market leading products. If aggregation helps this process, then surely that is a good thing?
Opening new doors
So why would mortgage intermediaries be interested in offering or recommending an account aggregation facility?
With advisers anxiously looking for opportunities to advise clients, account aggregation provides a regular and ongoing source of communication with clients.
As mentioned, the type of consumer interested in aggregation tends to be wealthier and more financially savvy than the average. Combined with the benefits of being the exclusive interface for a customer’s online financial statement, advisers would benefit from a service that allows both them and their client to interact on a daily or weekly basis ‘ transforming the intermediary/client relationship from an ‘as and when required’ scenario to a central role in their client’s day-to-day financial management.
Genuine financial benefits for customers are available via account aggregation and many of the benefits carrying the greatest financial rewards relate to mortgages. Viewing a current financial statement on one page gives a true holistic picture, and one where it is easy to see where a client’s money could be working harder.
Combine this with the ability to move funds to and from accounts throughout the month and it is clearly an opportunity for the client to maximise their money’s potential. It is expected that owners of offset and flexible mortgages have the most to gain as they can move spare cash from a current account into a mortgage, or move money from a mortgage to clear an overdraft or loan ‘ either way maximising their financial position.
This scenario isn’t far from the workings of a current account mortgage, however the benefit is that the consumer can individually pick each product as a best of breed, gaining the highest savings rates and the lowest APRs on loans, overdrafts and mortgages.
Andy Deller is head of banking and insurance at Egg
Account aggregation provides an ongoing opportunity for regular communication with clients.
Customers using aggregated accounts tend to be wealthier and more financially aware than average customers.
Account aggregation is particularly beneficial for borrowers with flexible or offset mortgages.