Building A Better Bank - Company Business and Marketing

Industry Standard, The, Feb, 2001 by Scott Berinato

CONSUMERS MAY NOT USE THE TERM, BUT WHAT THEY REALLY WANT IS "AGGREGATION" -- ONE-STOP ACCESS TO ALL THEIR FINANCIAL DATA. AT LEAST, THAT'S WHAT YODLEE AND OTHER NEW FIRMS ARE BANKING ON.

Anil Arora remembers the precise moment when he Citibank as a client. It wasn't when the biggest bank in the country finally signed a contract with his fledgling startup, Yodlee. Nor was it when he left a key Manhattan meeting with a handshake deal. No, what Arora recalls is the look on the face of the Citibank executives when he first demonstrated Yodlee's key achievement: a simple Web page for consumers allowing them to see all their financial data in one glance. "At the demo, all their conceptual thinking about it stopped, and it was like boom!" Arora says. Nine months later, Citibank launched MyCiti.com, built with Yodlee's back-end infrastructure just as Arora presented it that day.

The secret to Arora's presentation -- and to his company's success -- lies behind the latest buzzword in banking: aggregation. Aggregation companies like Yodlee collect data from customers' financial accounts and put them on a single Web site. Instead of having to log on to three different sites or read five different monthly statements to track the retirement accounts you've amassed from various jobs, you can see them all in one place, along with checking and savings account information, credit card balances, interest rates, stock portfolios and so on. Your funds may reside in different institutions, but aggregators make it look like a single virtual bank is holding them all. To Noor Menai, Citibank managing director of portals, aggregation is a "disruptive technology." Disruptive, he says, because it's one of those rare instances where a product or service improves customers' lives even as it increases marketing opportunities.

Aggregation companies like Yodlee, which in December merged with former rival VerticalOne, never imagined they'd need to make partnerships with the Citibanks of the world. Yodlee began by offering its all-in-one services directly to consumers, as did similar startups like Paytrust and PayMyBills.com. But no one came. It turned out that not many people wanted to turn over their financial secrets to an unknown company called Yodlee. But Citibank -- ah, there was a name consumers could (and did) rely on. Citibank, for its part, got a quick and happy lesson in the power of its brand. Most consumer questions, says Menai, were about "perception and trust. We didn't have to do anything except remind people they trusted us."

Even so, it's been slow going. By October MyCiti.com had signed up just 50,000 users. And nationally, there are barely a million customers using aggregation -- less than 1 percent of the online population [see chart, page 90]. But the future looks bright: Giddy analysts put the number at 36 million in 2004, though 4 million by 2002 is probably more realistic.

The outlook wasn't always so rosy. A year ago the banks were on the attack against aggregation, crafting strategies to protect what they considered proprietary information. First Union even sued Paytrust, claiming that Paytrust's bill-paying service violated its security and privacy policies. What was so threatening? The loss of control. Every minute that a customer spent checking his bank balance or portfolio at an aggregator's Web site was a minute he spent banking without the bank -- possibly without the bank even knowing. And if an aggregator could take a customer's account information and display it on their site, so, in theory, could a rival bank.

But the threat of aggregation was also its appeal: Customers wanted it. Quashing the services hadn't worked (First Union and Paytrust settled out of court), and banks soon realized they didn't have the technical expertise to build their own aggregation sites cost-effectively. Clearly, it was deal time. Today, virtually every major financial institution wants to be an aggregator; in most cases, they're seeking partnerships with those startups that just last winter threatened to poach their customers. Chase, like Citibank, hired Yodlee; FleetBoston is set to sign a deal with an as-yet-unnamed firm. Arora, who in a previous life built recognizable brands like Kraft and Gateway, says the partnerships work because he's accepted that Yodlee can't be its own brand. "What the Citis and Chases represent to their customers is miles ahead of what we could ever do for them."

To banks, aggregation works like a fishhook: It lures customers with one-stop service, then tries to make it difficult for them to wriggle free. Think about it: You've got all your financial information in one place. It's going to take more than slightly lower check fees to persuade you to switch banks. You might even take some of the accounts you're importing into your MyCiti.com page and switch them to Citibank accounts.

And talk about stickiness - if you're returning several times a week to pay your bills and check your stocks, the bank has plenty of opportunities to sell you other services. Mortgage refinancing. Debt consolidation. A new car loan. Maybe it'll notice you hold Fidelity mutual funds and offer you one of its own with lower fees. "Absolutely that's the intent, to get the customer base exponentially multiplying," Menai says. "With MyCiti, this is the first time a customer will get the entire breadth of Citi products in one place."