What is Account Aggregation?
Account aggregation enables users to see all their accounts and transactions in one place. For example, if ACME Financial offered account aggregation, account holders could log in and view data from Wells Fargo, Chase, and potentially anywhere else they have a financial account — all through ACME Financial’s banking portal. In short, account aggregation turns a digital banking portal into a one-stop financial hub.
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How Important Is Account Aggregation?
A range of recent studies have shown that account holders want easy access to all their account balances. For instance, the Federal Reserve found that more than half of account holders who use smart phones regularly turn to their bank’s app to check balances, and a study from Bank of America discovered that 81 percent of account holders log into mobile banking to check their balances — far more than any other activity. And according to Celent Research, 75 percent of account holders said that the ability to view all their finances in one place was “highly valuable” — more valuable than remote deposit capture, person-to-person payments, and the ability to pay a merchant in-store or online (e.g., Apple Pay).
Companies across the industry are realizing just how valuable this feature is. For example, the investment management company Personal Capital recently offered a promotion in which they offered $10 to every user who linked an account to their service. Personal Capital knows that if they can become the one-stop hub for everything related to investment accounts, they'll be the first place their customers turn for new financial products. They'll essentially own the entire user experience when it comes to investment accounts, and they'll get all the revenue that follows — which will be worth far more than $10 to them in the long run.
Financial institutions should take note. As the industry starts paying end users to add outside accounts, consumers will increasingly be drawn to institutions that service all of their banking needs: a one-stop financial hub.
In light of this, you might ask yourself whether your institution is positioned to become that one-stop financial hub, or whether you will lose out to third-party companies that can display their competitor’s data. If you lose, you risk becoming irrelevant as your account holders log in elsewhere to see all their account balances. To put it simply, account aggregation is the key to becoming the primary financial institution for your account holders.
How Aggregation Works
There are two prevalent ways to aggregate financial accounts. The first and most common way is through “scraping” a financial institution’s website. Screen scraping is a technology that extracts details (such as financial transactions from a web page) by mimicking human behavior. The downside to screen scraping is that if there are drastic changes to the web page, the connection may need to be updated before connectivity can be made stable again, a process that requires dedicated time from an engineer.
The second most common way to aggregate financial accounts is through a data exchange. A data exchange avoids most of the potential connection problems with screen scraping because the connection to the institution is direct. However, a data exchange is not always a viable option because each financial institution has to work with the aggregator to establish a direct connection. Despite this obstacle, connecting via a direct feed is the fastest and most secure way to aggregate financial accounts.
Let’s first look at two different approaches to fixing broken screen-scrape connections, and then we’ll circle back to talk about data exchanges.
Typical Aggregation and Broken Screen-scrape Connections
A major shortcoming of typical account aggregation services in the industry is that they only use a single data provider. This means that if the single connection to the data provider breaks, the account holder must wait days, weeks, or even months (depending on the data provider, the population of the connection, and the degree of work required) for an engineer to fix the connection.
Here’s what the typical process looks like:
- Account holder notices that their account isn’t updating
- Account holder calls the financial institution’s call center for help
- Financial institution calls the data provider to notify them of the broken connection
- Data source provider contacts engineering
- Engineering puts the request in their project list and gets to it when they can, whether that be days, weeks, or months
Unfortunately, when a connection remains broken, your account holders won’t blame the data provider or the institution with the broken connection. They’ll blame you. They’ll think it’s your software that’s broken, and you will suffer the reputational damage. And since 34 percent of users say that when they’re dissatisfied with a digital experience they’ll switch to a competitor’s app, reputational damage can be very costly.
A Better Approach: MX and Multi-sourced Aggregation
MX differs from the competition in that we’re the only company that offers patent multi-sourced aggregation. In other words, we have generally redundant connections with multiple data providers, as illustrated below:
These redundancies enable us to make alternative connections available after a connection failure occurs. This way account holders don’t have to wait around for an engineer to code a new connection. New connections can often be made available within minutes after MX is aware.
Here’s an example of how the process works best with MX:
- Our support team sees that a connection has become deficient
- We make a new connection available right then — no need for any coding
In short, multi-sourced aggregation helps to minimize the reputational damage that financial institutions may suffer when a new connection cannot be made available for an extended period of time. It’s the best way to aggregate because it keeps account holders happy.
Not only is our multi-sourced approach to broken screen-scrape connections more stable than anything else on the market, our approach to direct connections is better as well. Years ago, when we first started connecting directly to financial institutions, we found that industry standards were outdated, cumbersome, and essentially broken. We therefore decided to create and maintain our own protocol called MDX.
MDX is simple to implement, especially compared to older specifications such as OFX. To illustrate, the documentation for MDX is 20 pages, while the documentation for OFX is over 600 pages. Shorter documentation means lower operating and implementation costs. Additionally, the simplicity of MDX combined with the efficiency of the data exchanges allows for more reliable implementations. MDX and the design principles used therein go beyond the industry standard to ensure a more reliable and consistent end user experience.
Conclusion: Don’t Risk Your Reputation with a Sub-standard Aggregation
If you want to become your account holders’ primary financial institution, account aggregation is essential. It’s the only way to turn your digital banking portal into a one-stop financial hub. However, not any aggregation solution will do. Some solutions could cause reputational damage because they break so frequently and are generally unreliable. Only solutions that are consistently reliable can bring the results you need and give account holders the experience they expect.MX employs multi-sourced aggregation, an attentive in-house support team, and better direct connections to keep your aggregation success rates constantly high. With MX, you’ll be well on your way to becoming the primary financial institution — the first place account holders turn when they’re thinking about getting a new loan. Best of all, you’ll reap the revenue for years to come and protect your reputation with a solid aggregation experience.
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