Technology

Account Aggregation Falls Apart


By Geoffrey Smith Hailed as a key weapon in the online arsenal of financial-services outfits, account aggregation a year ago was widely viewed as a cool new Internet tool. Using a single password, you could link data from all your financial accounts at a single Web site, along with e-mail accounts, calendars, and news headlines. It was a supposed to be a great way to keep track of your online life all in one place.

Never mind. Account aggregation is turning out to be another Web dream gone bust. Just 1% of U.S. online households used such a service in the first three months of the year, according to Forrester Research. VirtualBank and Capital One have dropped the tool. Market leader Yodlee, according to Forrester, says just 44% of its enrolled customers have active accounts.

Good riddance. As a stand-alone product, account aggregation has little hope. The technology has a fatal flaw: Even though you can access data, you can't do anything with it except look at it. If you want to transfer money from one financial institution to another, forget about it.

MORTAL FEAR. But a year ago, banks and brokerages had no such worries. Indeed, they were agog over the technology. Like lemmings to a cliff, they rushed to add the service to their Web sites in mortal fear that customers would start bypassing their online offerings altogether because they would be able to access their data somewhere else.

I consider myself an online financial-services junkie, but Web aggregation never had much appeal. I've paid my bills online for the last five years. I track my credit cards, investments, and mortgage online. I sign up for almost any new service I can find, if only to try it.

But account aggregation is unreliable. I recently logged onto the service my broker offered and was shown a bank balance that was more than 120 days old. I tried "refreshing" the data, but it didn't work. Even if I could access the information, I'd have to go to my bank's site if I wanted to transfer money or pay a bill.

OFTEN USELESS. Advocates say the technology's real power will come when it's used for financial planning. Retirement-planning specialists such as mPower Advisors (www.mpower.com) and Financial Engines (www.financialengines.com) use aggregation technology as a part of their 401(k) planning tools. But it's only as useful as the data you put in. Some companies, such as BusinessWeek owner The McGraw-Hill Companies, have customized 401(k) plans that can't be analyzed by either service, making aggregation useless.

So far, using aggregation for financial planning is in the early stages. A company called Byallaccounts (www.byallaccounts.com) is a leader in the field but is aiming its services at financial planners. J.P Morgan's private bank offers one of the most sophisticated aggregation services available for its wealthy clients. But it relies heavily on data collected by its own staff.

Aggregation might be most successful in narrow markets. It could be useful in a financial calculator that would let you analyze your credit-card debt. Plug in all your credit-card accounts (and passwords to your online accounts for those cards), and find out how much you could save by consolidating your balances into a home-equity loan. Or type in your online mortgage-account number, and find out how much you could save by refinancing.

But as a stand-alone service designed to simplify consumers' lives and give banks and brokers a competitive edge, sorry. Account aggregation is just online clutter whose disappearance would not be missed. Smith covers a wide variety of topics, including personal finance issues, from BusinessWeek's Boston bureau. You can e-mail him at geoff_smith@businessweek.com


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