Academic journal article ABA Banking Journal

Financial Portals Are Hot, but for Whom?

Academic journal article ABA Banking Journal

Financial Portals Are Hot, but for Whom?

Article excerpt

Banks have the trust and some of the content, but Yahoo et al are not waiting on ceremony

Suddenly--even by Internet time--the long sought one-stop financial portal has arrived. E-banking watchers are predicting that by the end of this year, most big banks and some smaller ones will be sporting websites where customers can come to handle all of their financial affairs. What's been missing until now is the ability to aggregate information and perform transactions that involve a customer's accounts at rival institutions.

Rich payoffs await the bank that can field a full-service financial portal. Its customers will likely visit the site more often, stay longer, and use more services. An early-adopting bank has the chance to become its best customers' primary bank, where all financial information is consolidated into always-available net worth statements. For high-net worth customers, basic banking will likely evolve into online versions of what is now being called wealth management.

The dark cloud in this rosy scene is the fact that big, capable nonbanks have jumped into it first. Yahoo, Alta Vista, America Online and other hugely popular general-purpose portals are offering bill paying and account aggregation--plus news, sports, stock market quotes, weather, travel services, e-mail, and other drawing cards with proven power to keep websurfers coming back to their sites en route to other destinations. Survey after survey finds that consumers would rather handle their financial affairs at their banks, leading to the well-worn conclusion that this business is the banks' to lose.

Will banking websites, then, morph into general-purpose portals? Not likely. But who knows which way the ball will bounce? Of course, it's the customers who will decide, and re-decide, as new conveniences and benefits arise. Some observers of the changing scene think that the whole portal business will be restructured from the present general-purpose sites to a small number of generic portals. Likely candidates: shopping, financial services, sports, and entertainment.

Today, about 1,000 banks offer even the basics of online services; few of these banks are ready to take on the technical and financial challenges of offering aggregated accounts. Thus it's likely that this new level of services won't be available to customers of almost 90% of all banks. And the appeal of aggregation services will likely be limited (at first, anyway) to high-net-worth individuals who are comfortable with computers and who have a preference for self-service. That shrinks the potential demand for aggregation to less than 10% of all online households. If that seems small, it's not negligible: that small customer segment likely contributes 70%-80% of all bank profits.

Yet another twist in the calculus of aggregation services is that it's unlikely that consumers will want to aggregate all of their accounts at all of the providers' websites. Take a consumer who has accounts with two banks, a brokerage, and a mutual fund. She would gain no benefit--but much inconvenience--from giving out all four of her customer account numbers and passwords to all of the different providers and getting the same aggregated information from all four of them. More likely, she will choose one primary service provider to aggregate all her financial accounts.

Scraping the technology bottom

The technology of account aggregation isn't rocket science. Indeed, the method that started the current buzz goes by the distinctly low-tech name of "screen scraping." The main attraction of screen scraping is that it enables an aggregator to go to any financial site and, with the account owner's prior consent--but not the financial service provider's--make the bank's web server think that the customers themselves are making a routine request for their account balance or whatever. The main drawback of this method is that it scrapes messages written in HTML, which describes the format (type size, paragraph spacing, etc. …

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