By Ptacek, Megan J.
American Banker , Vol. 165, No. 235
No series of articles on nonfinancial interlopers into financial services would be complete without a look at the portals -- the technology companies positioning themselves to provide a single access point for all of a customer's financial relationships.
With account aggregation showing some staying power in the market, the question is: Will consumers choose to pull together all their finances under the auspices of a bank, or will they do so with one of the three main nonbank Internet portals -- America Online, Yahoo, and Microsoft Network?
These three portals, all of which have embraced aggregation, say they have no intention of becoming financial services providers (as some bankers had feared a few years ago), but the services they are offering nonetheless have the potential to siphon a significant amount of online business away from banks. As banks strive in their Web efforts to "own" as much of their customers' time and relationship as possible, the portals represent extra suitors for the attention of bank customers.
The outcome of this debate is still in question. The banks have the advantages of their trusted brands, their ability to move money among aggregated accounts, and the fact that people are more likely to follow financial advice from a bank than a nonbank. But the portals have a lot going for them, too. They introduced account aggregation sooner, they have many more users than most individual banks, and they are more likely to let people aggregate more types of information -- not just financial accounts, but news services, favorite shopping sites, and other information that people like to browse on the Web.
Executives at America Online, Yahoo, and Microsoft Network say they are optimistic that their sites will continue to attract lots of users interested in aggregating all kinds of accounts, which would pit them against banks that want those customers as their own. Executives at the portal companies will not say how many people have signed up for these services, but do say that demand has been surprisingly high.
Working in the nonbank companies' favor is that many people are introduced to the Internet through a portal, and traffic to all three is very high. In October nearly 54 million people visited Yahoo; more than 42 million went to MSN, and more than 35 million to America Online, according to MediaMetrix, a New York research firm.
Though the portals got a head start, introducing aggregation services months ago, the banks have taken an early lead in consumer adoption, according to Yodlee Inc., the aggregation vendor whose technology is used by many leading Internet portals as well as about 20 financial institutions. Yodlee's clients include Citigroup Inc., Chase Manhattan Bank, and Morgan Stanley Dean Witter & Co.
"There is a significant difference between adoptions rates of our financial institution customers and portal customers," said Anil Arora, president and chief executive officer of Yodlee, of Redwood City, Calif. "The banks we've launched are incredibly stronger than we anticipated."
Mr. Arora predicted that portal and bank sites would attract very different types of people. "Those who put a premium on trust will go to the financial institutions, and these will be the largest segment," he said. "But there is another segment who live, eat, and sleep on portals, and they will continue to aggregate there."
Each side is vying to win over the millions of customers who are said to be eager for online aggregation. Meridien Research projects that 3.1 million consumers will use such a service by 2003. All the institutions that have introduced aggregation say they have been pleased with the early results.
Yahoo Finance, which began offering aggregation on its finance channel in August, is "extremely happy with its adoption," said Timothy Sheehan, director of production for the site. "We are exceeding our expectations. …