What's New in Cybertalk?

By Jean Gora
August 2000

Note: CyberTalk is a column that appears monthly in LOMA's Resource, the magazine for insurance and financial services management. To see more contents of the magazine and to see how to subscribe, click on RESOURCE MAGAZINE.

Customer Information Aggregators

As legislators, regulators, and lobbyists debate consumer privacy protection on the Internet, Internet entrepreneurs continue to develop new systems and services that aggregate consumer financial information and other personal data in a single location. Several new approaches to aggregation are attracting significant attention at present. This month’s CyberTalk examines these activities and insurance company involvement in them.

Account Aggregators

Account aggregators allow consumers to access information on all of their financial and non-financial accounts at multiple institutions and companies through a single Web site. They aggregate information from bank accounts, investment accounts, insurance policy accounts, credit card accounts, frequent flyer accounts, utility accounts, and virtually any other type of account a consumer might have. The aggregator pulls account information from all of the organizations with which the consumer does business on the Internet.

Users give the aggregator the user names and passwords through which they access the Internet sites (such as online banking, insurance, or securities trading sites) that now generate their account information. The aggregator uses these passwords to access the accounts, scrape the account information, transmit it back to the aggregator’s site and make it available to consumers in integrated form. Thus, the customer of an aggregator can monitor his bank, insurance, and securities accounts through the aggregator’s site without accessing the bank, insurance, or securities trading sites directly.

Because consumers no longer access their sites directly, financial institutions lose cross-selling and relationship-building capabilities. Portals that fail to offer account aggregation capabilities risk losing their portal status; if consumers can access all of their financial accounts elsewhere, their need to use a portal diminishes. Companies such as Yodlee, Corillian, VerticalOne, eBalance, and others offer businesses software that enables them to offer account aggregation services to their customers.

No Control

One of the most interesting aspects of aggregation is that financial institutions and other organizations have no control over whether an aggregation service uses their account data. If their customers turn over user names and passwords to the aggregators, the aggregators can access their data. Yodlee offers a list of approximately 1,400 financial institutions that inadvertently supply account data to it. These institutions include Bank of America, American Express, Aetna’s and GE Benefits’ 401(k) programs, and a host of others. No other insurers appear at this time. Yodlee’s list includes the following statement: "Sites are listed for the benefit of Yodlee users and access to these sites is made on the user’s behalf. A site’s inclusion in this list does not indicate that the site recommends, sponsors, or is affiliated with Yodlee."

Not surprisingly, the capabilities of account aggregators are attracting significant attention from a host of other parties that aspire to offer consumers integrated access to financial and other services. These include major financial conglomerates including Chase, Citigroup, Allianz, and Zurich. They also include major portals such as Yahoo! and AltaVista, major Internet access providers/portals such as AOL, and makers of traditional household financial management software such as Intuit and Microsoft.

Aggregator Ambitions

The account aggregators’ ambitions go well beyond account aggregation. Consider what happens to a consumer who needs a mortgage and who has never previously owned a house. To apply for the mortgage, the consumer must disclose certain information about his finances to the mortgage company. If the consumer uses an aggregator, the aggregator can access the relevant information immediately and populate the mortgage application. The applicant would not need to fill out the form. Thus, the aggregator is positioned to play a critical role a host of future purchase activities undertaken by the consumer. That position is very powerful indeed.

As noted above, one account aggregator is VerticalOne, a company that was acquired by S1 Corporation in 1999. S1 is the former Security First Technologies, the developer of the first Internet bank. On May 25, 2000, S1 issued a press release announcing that it had received equity investments totaling $244 million (U.S.) from five financial conglomerates. These are Zurich Financial Services Group, Allianz AG, State Farm Mutual Automobile Insurance Company, FleetBoston Financial Corporation, and JP Morgan.

The press release quotes Zurich chairman Rolf Huppi as saying that, "S1 has the vision, technology, and experience to make the concept of eFinance a reality in today’s global online financial services market." Dr. Friedrich Wobkiong, member of the board of management of Allianz Versicherungs AG, is quoted as saying, "As a global financial institution whose many businesses will derive great benefits from innovations in eFinance, Allianz believes it is important to align itself with technology leaders like S1. As an investor, we see great potential for value creation with S1 and its focus on eFinance."

Consumer-Created Data Repositories

Consumer-created data repositories represent a somewhat different flavor of aggregation in that they do not draw on existing account information. Rather when a consumer initiates some sort of transaction requiring that he submit information to a third party, the consumer has the option of storing that information in a secure data repository. With a few quick clicks, the consumer can submit the same information to another third party without having to re-enter it.

Thus, the consumer who applies for insurance from one online insurer stores the information in a repository. If the consumer wants to apply for insurance from another company, he can use that information to populate the new application. If the consumer undertakes other activities that require the input of that information, it becomes available to other activities as well. The consumer controls what information enters the repository and who receives it.

An Internet start-up called enfoTrust networks, based in Atlanta, GA, offers these application-populating capabilities. Its initial applications target financial services (insurance and credit), travel services (making reservations), education services (college and financial aid applications), retail services, home services, career services (online job applications), government services, and medical services. The enfoTrust service is free to the consumer and employs extensible mark-up language (XML). XML permits meta-tagging of Web content while the traditional Internet hypertext mark-up language—HTML—only formats information. XML greatly facilitates the integration of information from disparate sources.

Cooperation Required

In contrast to the account aggregation services described previously, cooperation on the part of financial institutions and merchants is required for consumer-created data repositories. The consumer goes to the organization’s Web site and initiates an application. A button bearing the words "enfoTrust accepted here" appears. The consumer clicks on it. If the necessary data is already stored at enfoTrust (i.e. if the consumer has an "enfoPass"), the consumer enters an ID and a password and clicks "submit" and the application data is automatically transmitted to the financial institution or merchant.

These organizations have an incentive to participate in the program because consumers with enfoPasses are likely to want to avoid the hassle of re-entering data. Therefore, they will be likely to do business primarily with organizations that cooperate with enfoTrust.

Insurance organizations are already involved in enfoTrust. ReliaQuote and InsWeb are both enfoTrust users. The enfoTrust Web site also displays the logos of the Electric Insurance companies, The Hartford, and ACORD.

These developments suggest that at least some insurers and insurance intermediaries understand the importance of account aggregation and consumer data repositories.