Mint.com launched in late 2007 as the first online consumer platform that aggregated financial data from many different services. In just two years, the service attracted 1.5 million users and was sold to Intuit, the popular maker of QuickBooks accounting software, for $170 million. Since then, a handful of upstarts offering similar services like Personal Capital and SigFig have raised millions in venture capital targeting the investment end of the data aggregation spectrum and providing healthy competition to human financial advisors.
At the same time, banks, brokers, and other financial institutions have been hesitant to provide access to these applications. The fear is that customers and competitors would be able to easily see interest charges and other sensitive details that may erode their competitive edge. In addition, they argue that there are high costs and complexities associated with paying for servers to handle the increased traffic to building alternative solutions to provide the data.
Let's take a look at some of these conflicts and where the industry is likely to head over the coming years when it comes to data aggregation. (For related reading, see: 6 Best Personal Finance Apps.)
Many financial institutions don’t provide a direct link to data aggregations, which isn’t surprising given their antiquated technology. For the data aggregator upstarts, this means they are forced to robotically log in to a client’s account and “scrape” the information. The process typically involves a computer program visiting a bank's website, logging in using a client’s credentials and then reading through code to take out information like account balances automatically.
With Mint alone having millions of active users refreshing their accounts multiple times per day, the scraping process is quickly overwhelming the servers of popular banks. The demand during peak periods is so bad that some banks are struggling with slowdowns for their regular customers who are trying to login and conduct normal business. In essence, it’s a denial of service attack of sorts, flooding websites with enough traffic to slow them or bring them down.
In addition to the slowdowns, banks have struggled with identifying the difference between data aggregators logging into an account several times and hackers trying to do the same thing. Consumers may face account lockouts in these instances if there have been too many failed attempts to log in, which hurts client relationships. (For related tech reading, see: 5 Best iPhone Finance Apps for 2016.)
Consumers Caught in the Middle
Some large banks have responded by banning data aggregators from accessing their website. In practice, this is done by telling a server to block the IP address of a data aggregator’s computer program, thereby disabling them from logging in and retrieving the information. Consumers using data aggregators like Mint then either see error messages — if the decision was made suddenly — or the bank is removed entirely from the list of compatible institutions.
There are many problems with this knee-jerk response. First, customers using data aggregators may be annoyed by the inability to interface with their bank, which could lead to them switching banking providers. Banks shouldn’t underestimate the desire to use technology and the willingness to switch, especially among younger generations. Second, many banks are using data aggregators to power their mobile platforms, which could lead to tensions.
Consumers are caught in middle of this struggle. Without the cooperation of banks, they may see inaccurate data reported on their data aggregator of choice or may not be able to access their financial data at all. Data aggregators themselves may also be causing their online banking experience to slow down or may be causing accounts lockouts. (For related tech reading, see: Top Money Management Apps.)
The best solution for banks would be to implement an application programming interface (API) designed to handle data requests. By routing data aggregation requests to an API rather than a website, traditional customers wouldn’t experience a slowdown due to data aggregator demand and may not even need to expose their login credentials. The data would also be much more reliable, since it wouldn’t have to be scraped in an archaic fashion.
The good news is that this solution has been gaining steam. In 2014, an industry association known as the FS-ISAC proposed creating a standard API to share information from bank accounts. The model would follow countless other companies that have safely implemented these technologies, including Facebook, Twitter, Google and Apple, who serve billions of customers and handle equally sensitive data in some cases.
The bad news is that the banking industry still seems reluctant to spend the time and money to implement these kinds of solutions. In all likelihood, banks are waiting on the sidelines until there’s a larger movement towards these services across the industry to mitigate any competitive concerns and force the time and capital investment to keep up.
The Bottom Line
Data aggregators have become extremely popular over the past several years, with the rise of services like Mint and Personal Capital. While consumer demand for these services is apparent, banks and other financial institutions have been hesitant to offer easy access to the data for competitive and cost reasons. Consumers have been caught in middle of the fight with technologies that are subpar on both ends. Things are likely to remain this way until a compromise is reached. (For related reading, see: How Humans and Robots Will Improve Financial Advice.)