By Ray Birch
BROOKFIELD, Wis.—Is the concept of a primary financial institution fading away? Or is it just that a service delivery evolution is underway that requires credit unions to respond in a new way?
Those and other related questions have been the subject of some debate among financial services analysts as consumers embrace third-party account aggregation tools and fintechs expand their reach into traditional financial services.
It’s a shift Fiserv is encouraging credit unions give attention by offering the right tools to not just help members use more services but, more fundamentally, remain with the credit union itself.
“Consumers are redefining what primary financial institution status means, and the use of non-traditional financial providers plays a part in that,” explained Andrew Vahrenkamp, program manager at Raddon, a Fiserv company. “Many younger consumers currently associate themselves with big banks, in large part because these consumers seek out robust mobile technology and perceive big banks to have it. However, when younger consumers are disappointed with the big banks, as our Raddon surveys show they often are, we anticipate they will increasingly look to non-traditional providers as an alternative.”
Vahrenkamp said credit unions have little choice but to build out robust digital offerings that meet the needs of current and prospective members, and just as importantly, make members aware credit union technology offerings can be just as robust as those from big banks.
“Facilitating aggregation of account information—at the PFI or outside of it—can be a viable part of a member experience strategy,” he said. “Instead of an all-or-nothing philosophy, it’s a matter of give and take in order to maintain that PFI relationship, acknowledging that members may sometimes want to access their data in other ways and that a PFI can build satisfaction and loyalty from facilitating this.”
Ann Cave, director of public relations at Fiserv, noted consumers want and need can sometimes outstrip their financial institution’s ability to deliver.
“And different banks and different credit unions have different perspectives on what capabilities they want to deliver and how they want to deliver them,” she said. “I think all banks are thinking carefully about what does my customer want and can I deliver that to them inside an experience that they might find suitable.”
Cave pointed out there are many tech firms “moving at a high rate of speed,” offering new financial services products delivery options.
The Question to Ask
“Therefore, I think it's hard for credit unions or banks to have one of everything,” she said. “They have to ask which ones are most important and go from there. Maybe credit unions that that in the past relied on five products per member now rely on three? Because, as a consumer, I can now, with financial management tools, look at offerings all across the country.”
And with account aggregation tools the consumer can now review all of their FI products and services on one page.
Despite the reshaped marketplace, Cave said member loyalty remains a viable reality, with Fiserv studies showing members appreciate when their credit union makes their data easily available for them to use via their account aggregation tool.
“So, maybe the PFI is not going away, it’s just that the mindset of the consumer is changing,” she said. “The credit union does not have to offer everything the member wants, but they can still remain the PFI in the minds of their account holders.”
The Key
Paul Diegelman
Paul Diegelman, vice president, digital payments and data aggregation at Fiserv, said a key to account aggregation is the way the tools gather the data. He explained many of the tools will “screen scrape” data from the consumer’s financial institution’s online banking site.
“Consumers are increasingly using a wide range of third-party applications to meet their financial needs, many of which rely on consumer-permissioned access in order to aggregate financial account information,” Diegelman explained. “This can create challenges for banks and credit unions, which currently have limited control over the timing or volume of data requests by third parties, or the security protocols used to protect this information.”
However, that method of service delivery is both data intensive and time consuming.
“When they screen scrape from the financial institution’s online banking portal, it slows down the portal. It can really bog it down if there's too much traffic coming through,” Diegelman explained. “Banks and credit unions didn’t launch online banking portals for the purpose of serving bots and aggregators. If there's too much traffic it slows down the experience.”
One Aggregation Tool
Fiserv offers and account aggregation too call AllData Connect. Diegelman said the tool directs consumers to a Fiserv-hosted portal where they validate their identity and provide consent to share their information. Fiserv then validates credentials and keeps information secure within its firewall.
“Using industry-standard file formats modeled after the Durable Data API format sanctioned by the Financial Data Exchange (FDX), AllData Connect then delivers data to third-party applications for a specific application or transaction,” he said. “This eliminates the need for third parties to acquire consumer data via screen scraping of the financial institution website.”