Account Aggregation

What is Account Aggregation?

Account aggregation is gathering information from several bank accounts belonging to a person or household, or perhaps all of them, in one location. The aggregation of financial data is another name for it. For instance, a net banking service may offer a homepage where account users can view data from their checking, savings, CD, and investment accounts. Account aggregation services are also offered through personal financial software, applications, and internet resources like Mint or Quicken.

How does Account Aggregation work?

Aggregation of accounts often takes place exclusively inside a single banking institution. If the account owner consents, some assets held outside of a banking institution could be included.

Customers may often combine information from all their savings, current and investment accounts, and other capital assets across all the organizations they deal with through personal financial services. Users often need to supply account-access credentials, such as login details, for each account they want to include in the aggregate. The assistance often scrapes or downloads respective bank balances and other details from each linked account using the authorized data credentials to include it in the aggregation.

However, account aggregation software frequently has access restricted to balance and transactional data. Additionally, many aggregation platforms forbid customers from conducting transactions inside the other sites for security concerns.

Some aggregation systems and tools, especially those used by experienced investment advisors on behalf of their customers, also gather other gross data, such as previous home estimations, in addition to information from cash reserves, checking, broker, and other banking information. Platforms for aggregating accounts may also classify revenue and expenses.

The financial outlook for certain services could even contain debt liabilities. For instance, account aggregation sites or facilities may also include credit card accounts granted by the organization holding the aggregate accounts or external accounts that the account owner has permitted to be added.

Is Account Aggregation secure?

Account aggregation via official APIs (Application Programming Interfaces) is quite safe. The danger of fraud is decreased since it verifies details with the user's bank and doesn't keep or share such information with outside parties.

Instead of using open banking, some institutions provide account aggregation facilities through screen scraping. To obtain a user's account data, screen scraping typically collects their login details, such as usernames and passwords, on a single screen, sometimes a "mirrored" login site. The data is then translated for usage by another program.

Screen scraping is much less safe than account aggregation relying on APIs since third parties may utilize but retain this information. Service providers can view more information than the user allows because access to financial information is not usually personalized.

Unlike screen scraping, which has weak security measures, open banking has a solid regulatory structure, which makes it perfect for account aggregation. Companies that offer AIS (Account Information Services) are designated as Account Information Service Providers (AISPs) under UK open banking regulations. These institutions can access only financial data.

It is crucial to note that Payment Initiation Service Providers (PISPs) must carry out operations from a customer's profile, such as making payments. Additionally, end users can withdraw their consent anytime, giving them control over how, when, and whether facility providers access their information.

Advantages of Account Aggregation for Customers

Account aggregation offers end customers several benefits, such as:

1. Providing a Clearer Picture of their Finances

The typical customer uses many banks for their financial transactions. The largest rate in Europe in 2020 was found in the UK, where the average person had an average of around 2.8 accounts.

Earlier, individuals would have to manually compile data from several online banking services to understand their finances without account aggregation comprehensively. This procedure is automated and made simpler by account aggregation. It provides consumers with a comprehensive view of their financial strength by gathering all their details in one location. Apps may then use this data for analysis to present more in-depth insights from various accounts.

2. Offering More Personalized Features

Account aggregation involves more than simply data visualization. Businesses may utilize this data to understand each consumer's requirements and provide better financial products. For instance, Revolut (a British-Lithuanian bank and financial technology company) may examine users' current accounts and suggest the best credit cards, loans, or overdraft charges accordingly.

With account aggregation, finding good deals with relative information is also beneficial. Apps can determine how much you spend on electricity or the internet each month by distributing the data category-wise using account aggregation. They can then make recommendations for other companies that offer comparable services for less money.

Additionally, there are many other opportunities for savings. Apps like Chip use AI (artificial intelligence) to analyze data in bulk. Then, it suggests personalized money-saving advice that may result in yearly savings of thousands of pounds for the users.

3. Aiding in Credit Decision-Making

Aggregated account information may give customers a comprehensive picture of their financial situation, so it's not surprising that lending businesses utilize it to assess creditworthiness. Lenders may utilize it instead of credit ratings in situations where the claimant's history is shaky. As a result, the lender makes decisions more quickly and uses fewer manual procedures.

Advantages of Account Aggregation for Businesses

Not only do customers benefit from account aggregation, but organizations can also benefit from its benefits, including below:

1. Improved Client Experience

As was already noted, account aggregation enables companies to provide more individualized consumer services. As a result, businesses may provide items that customers are more inclined to utilize, which fosters consumer loyalty. Furthermore, a better customer experience is often served with this approach.

2. Quicker and More Affordable Onboarding Procedures

Customer onboarding may be a challenging process. Before granting consumers access to an item or service, certain organizations must conduct thorough investigations to confirm the user's identity. Requirements for Knowing Your Customer (KYC) and Anti-Money Laundering (AML) might make the recruiting procedure take longer.

Account aggregation can aid in establishing a customer's identification since it compiles data that the user's bank has previously confirmed. This expedites the onboarding procedure while also satisfying business regulatory requirements.

Common Benefits of Account Aggregation

Account aggregation may be a helpful tool for managing finances and budgeting since it gives account holders easier access to their accounts. Families with several financial objectives, such as retirement savings and education, may find that aggregating accounts is especially helpful because the reports provide a full view of the family's economic resources in a single place.

All the savings, checking, stockbroker, and other accounts held by the individuals of a certain household are connected in a process known as householding. Married people and household members can use a household account to handle their pooled funds and advance their joint financial objectives.