As the financial services industry finally adapts to an online culture,
those at the cutting edge are gearing up to introduce the next stage. The
latest proposition addresses the challenge of bringing all a client's
accounts on to one site using a single password.
The service, known as aggregation, is being brought to the UK by a number
of firms which have already found success in the US. One provider, Yodlee,
has more than a million users in the US and has a client list which
includes such names as Charles Schwab, Morgan Stanley Dean Witter and Chase
In the UK, it claims to have six major financial services players already
signed up and ready to go live over the next few months.
The concept of aggregation is not about becoming an all-round financial
services provider. Platforms with an aggregation service are simply
attempting to ensure that consumers use their site as their first port of
call for all online activities.
For example, with the consent of the client, a fund supermarket would be
able to provide access to all that person's financial dealings from bank
accounts to loyalty card statements. The client would never need to go to
more than one site to view all their accounts, even though they may be held
with multiple providers.
Among other benefits, aggregation gives websites the chance to guarantee a
high volume of hits and ensure strong advertising revenues.
BT Finance Industry Solutions recently carried out a survey to determine
how UK consumers are set to receive aggregation. The research revealed that
most people are willing to begin using such a service although few are sure
of who they would trust with such a task.
BTFIS emerging technology manager Charles Juniper says: “BT's research
shows there will be a tremendous demand for aggregation in this country. If
an aggregation service was launched tomorrow, there would be instant
adoption. The desire for this sort of service already exists.
“There is a misconception that British consumers are cautious when, in
fact, they are willing to embrace anything that makes life easier.
“What potential providers of financial aggregation must understand is that
consumers want impartiality and some will find this difficult to deliver.
Some organisations are going to have to alter the way they work.”
For the IFA market, the implications of aggregation may at first appear to
be negative. Aggregation will enable the direct consumer to manage their
accounts more easily and may make them feel they have less need for an
However, several UK firms which are looking to incorporate aggregation
into their services have already made it clear that they want to enable
IFAs to participate in any systems that they use.
As a result, Yodlee says it is looking to develop its service to encompass
IFAs. Describing how an IFA aggregation service may work, director Steve
Gibson says: “There would be some kind of authentication process where a
high-net-worth individual would nominate their IFA. The individual would
then specify which accounts that IFA could look at.”
Financial Technology Centre director Ian McKenna believes aggregation will
go much further for IFAs. He says: “It is important IFAs do not see
aggregation as a threat. It is only a threat if they do not embrace it. If
you can operate true aggregation and automation, you have the chance to cut
down a lot of costs. Aggregation could make a major contribution to the
success of the IFA community.”
McKenna points out that aggregation has a few hurdles to jump before it is
ready to take off in the UK. Most of the US aggregators use a method called
screen-scraping where, with the permission and passwords of the client,
they retrieve account details from various providers' sites without
entering into any agreement with the provider.
But it is still unclear whether this system will work in the UK. McKenna
believes it will be much more advantageous for the industry to develop
co-operative aggregation systems where providers agree to make the
information available to aggregation platforms.
Inevitably, the next few months will see the launch of the first
aggregation service. Companies such as Egg and Fidelity have made it clear
they are in advanced discussions with aggregation companies, with both
likely to announce plans this summer.
But IFA aggregation may be a little longer in the pipeline and there is no
indication as to how it will be received.
Nevertheless, if issues of security and impartiality can be countered,
then a platform which claims to help IFAs cut their costs in an environment
of increasing pressure on margins should be sure to be met with open arms.