What is Account Aggregation? How it Works, Benefits, and Risks

In this post, we will cover:

• What is Account Aggregation?
• How Does Account Aggregation Work?
• What are the Benefits of Account Aggregation?
• What are the Risk of Account Aggregation?
• What is Account Aggregation Software?

What is Account Aggregation?

Account aggregation, also known as financial data aggregation, is the process of bringing together information from different financial accounts into a single place. It enables consumers to connect and view their checking accounts, savings accounts, investment accounts, credit card accounts, mortgages, HSAs, FSAs, and much more to gain a comprehensive picture of their finances.

How Does Account Aggregation Work?

There are several ways that financial institutions and fintechs can enable consumers to link their financial accounts today:

• Screen Scraping or Credential Sharing:Screen scraping is the process of gathering data from one app by inputting user credentials (such as username and password) and displaying that data in another app.Screen scraping requires consumers to share their username and password with the data recipient to gain access to their data. 
• Whitelisted IPs: This allows a financial institution to sanction data sharing with specific IP addresses and see who is accessing their consumers’ data.
• Open Finance APIs: Open finance APIs allow consumers to access their transaction data without the need to share usernames and passwords, replacing credentials with tokens, delivering higher levels of security, faster speeds, and higher connection success rates.

What are the Benefits of Account Aggregation?

Account aggregation benefits consumers and businesses. In fact, 72% of consumers would likely seek out a different bank or credit union if their current provider couldn’t connect their financial accounts to financial apps or other online accounts. Benefits of account aggregation include:

• Avoid Manual Gathering. Account aggregation enables consumers to access data from a range of sources without having to sign into a range of sources every time they want to see their account and transaction information.
• Get Fast Access. Consumers can connect accounts in seconds. By empowering users to sign into a single portal and see everything at once, companies that offer account aggregation make life easier for their users.
• Automate the Process. After a user aggregates their accounts they can automatically see new transaction data. This is especially true for API connections, which, unlike screen-scraped connections, have reliable uptime and connectivity.
• See Current Data. Because connections aren’t manual, consumers can sign in and see their most recent transactions every time.
• Enjoy Reliability. With direct connections via an API, consumers can be certain that they’ll be able to see all their data whenever they log in.
• View the Big Picture. Best of all, consumers and companies alike will be able to see the big picture with account aggregation. Consumers will be able to see all their financial data instantly, and companies will have a 360-degree view of their consumers. This means that companies that offer account aggregation will be able to see what their competitors are up to — directly via their own banking portal. Every time a customer connects an account with your competitor, it gives you the upper hand. (Likewise, every time one of your customers connects an account with you to your competitors, it gives them the upper hand, illustrating the importance of being the first to offer account aggregation.)

Without financial data aggregation, consumers must look across a multitude of financial accounts to try to manage their financial life. On the other side, financial providers only glimpse a fragment of a consumer’s financial picture and lack visibility into where consumers are sharing data from their systems with others.

What are the Risks of Account Aggregation?

Every time data gets shared online, there’s always an element of risk involved. That’s why it is so important to choose the right data aggregation partner.

With tokenized, credential-free APIs and whitelisted screen scraping partnerships from MX, account aggregation is safer than ever. Account aggregation APIs enable companies to verify, authenticate, and aggregate data without ever sharing usernames or passwords, and whitelisting enables companies to know who is pulling what data.

What is Account Aggregation Software?

Account aggregation software makes account aggregation possible. In the past, account aggregation software mostly focused on screen scraping, as mentioned above. 

But the future of financial data aggregation is centered on Open Banking and Open Finance. Open Finance puts the consumer in control of their data, and enables financial institutions and fintechs to deliver more personalized money experiences that drive better outcomes for consumers. This is why account aggregation is increasingly taking the form of account aggregation APIs between financial aggregators, such as MX, and other companies, including financial institutions and fintechs. 

To understand the industry and the options available here, see our list of major financial data aggregation providers in the US.