Clients and regulators press for digital account aggregation in financial services
Swiss researcher MyPrivateBanking has issued its Digital Account Aggregation in Wealth Management 2017 report that analyses the status and trends in digital account aggregation worldwide and identifies leading platforms and vendors.
“Digital account aggregation will be the new normal in wealth management over the next 5-10 years. The best option for wealth managers is therefore to realise this trend and take the necessary steps to become an early adopter rather than risking to be too late,” said Rosalia Engchuan, senior analyst of MyPrivateBanking.
Retail and wealth management clients increasingly expect to access account information from various institutions in one digital interface and wealth managers are perfectly placed to take advantage of new automated account aggregation technology.
The report identifies three key drivers that make automated account aggregation a must rather than an option for offering a competitive value proposition in wealth management. First is the fact that regulators are pushing for opening application programming interfaces (APIs) and open banking. The PSD2 regulation in Europe is set to disrupt the traditional payments landscape by fostering technological innovation such as open APIs within the financial realm of the EU. However, PSD2 is not the only legislation of its kind and in the UK the nine largest UK banks have been ordered to provide an Open Banking API interface to facilitate the sharing of customer data within a year and similar efforts to opening APIs are seen in the US.
Second is the rise of the millennial client. The millennial generation expects to have one place where they can login and can get an overview of all their data within one click. Their benchmark for the client experience is not shaped by financial service providers alone. If these expectations are not met, millennials will change their banking platform for a better technology platform solution.
Lastly, fintech players offer easy-use, easy to implement solutions for end-users and banks. PSD2 makes it much easier for new entrants to the market to steal away customers from established bank. Fintechs like MINT and Personal Capital are already offering a holistic overview of a client’s wealth as well as tools for analysis and tips for cutting fees and re-allocating funds. Robo-advisors Betterment and Vanguard Personal Advisors have already partnered up with vendors to offer account aggregation and MyPrivateBanking sees far more cooperation within the FinTech sector for automated account aggregation offerings in the pipeline.
“Unlike with some other parts of the financial sphere, the mandatory implementation of API technology has not yet reached the wealth management industry,” stressed Rosalia Engchuan. ”This means that wealth managers still have the—rapidly closing—opportunity to choose to implement on their own terms and therefore retain more control over the process.”
In MyPrivateBanking’s view, there are several good reasons why wealth managers are perfectly placed to take advantage of new automated account aggregation technology. They increase advisor efficiency with computer assisted data and risk metrics computed using a client’s complete financial history and, additionally, to make this data available to other systems, for example, financial planning or performance reporting tools as well as client portals or CRM systems.
It also frees up advisors from manual entry tasks and allow them to devote more time to developing their personal relationships with HNWI and UHNWI. Additionally, the lower cost that is associated with providing holistic financial services broaden their potential client base to include mass affluent or affluent clients as well.
The report further recommends wealth managers to implement automated account aggregation into their digital strategy along three key pillars. First is to partner up and find the right partner to embark on the automated account aggregation journey. Wealth managers do not need to go it alone and vendors already offer solutions to meet whatever the needs of the manager and clients may be.
Subsequently is to use automated account aggregation as the cornerstone of a long-term digital ecosystem. Wealth managers should look at automated account aggregation as simply one building block of an integrated digital strategy that will also pay off in gaining and keeping the clients of the future—millennials.
Lastly is to take full advantage of Big Data and advanced analytics. Automated account aggregation in and of itself doesn’t need to be the end. Instead, the data gathered using these tools can be put to good use for advanced analytical purposes. Wealth managers should see the wealth of different solutions, ideas, technologies, and implementation strategies as an opportunity to get inspired rather than a threat.