Account aggregation takes the mess out of managing money. Made much more powerful with open banking, it compiles data from multiple bank accounts into a single, streamlined view. No more logging into multiple apps. No more struggling to get a complete picture of your finances. Through account aggregation, companies like Revolut and sync. have delivered seamless customer experiences to millions of users.
So what is account aggregation? And how can you use it to unlock the potential of your customers’ data? Here’s a look at what account aggregation does and how you can benefit from it.
How does account aggregation work?
Account aggregation involves fetching data such as balances and spending information from a user’s bank accounts. Open banking is key to making that happen. It lets account holders determine who can access their financial data and how they can use it.
Before open banking, banks and other financial institutions in Europe could withhold this data from others. But with the passage of legislation such as PSD2 and the UK’s Payment Services Regulations (PSRs), these organisations were required to share appropriate financial information with regulated companies — known as third party providers (TPPs) — upon request from customers.
Today, TPPs can offer account information services (AIS), which involve fetching read-only financial data from a customer’s accounts, even if they hold accounts at several banks. Apps like Revolut and Chip then take that information and display it in an interactive, user-friendly view. Voila — you’ve got account aggregation.
So how do TPPs actually gather that information? They use application programming interfaces (APIs), which allow different applications to exchange data. Open banking APIs request a user’s account information, which passes to the TPP. The TPP then provides that data to businesses.
Is account aggregation safe?
API-based account aggregation is highly secure. It authenticates details with a user’s bank, and it doesn’t store that information or share it with third parties, reducing the risk of fraud.
Some organisations offer account aggregation services through screen scraping instead of open banking. Screen scraping also gathers a user’s account information, but it does so by collecting their credentials, such as usernames or passwords, on one screen, often a ‘mirrored’ login page. It then translates that data for another application to use.
Since third parties need to use and store these details, screen scraping is significantly less secure than API-based account aggregation. Access to financial data isn’t tailored, so service providers can see more data than a user may want to share.
Unlike screen scraping, open banking benefits from a robust regulatory framework and strong security features, which make it ideal for account aggregation. Under UK open banking rules, companies that provide AIS are known as account information service providers (AISPs). These organisations can only access financial data.
Crucially, AISPs are unable to perform actions from a user’s account such as making payments, which must be performed by payment initiation service providers (PISPs). End users can also revoke their permission at any time, allowing them to choose how, when and whether service providers can access their data.
What are the advantages of account aggregation for customers?
Account aggregation provides several advantages for end users, including:
Offering a better view of their finances
The average consumer’s financial activity isn’t confined to one bank. The average person in the UK had 2.8 accounts in 2020, which is the highest rate in Europe. Without account aggregation, users would need to manually gather information from multiple online banking providers to get a complete idea of their finances.
Account aggregation automates and simplifies this process. By bringing all of their information together in one place, it gives users a full picture of their financial health. Apps can then analyse this data to provide more detailed insights from multiple accounts.
Providing more personalised features
Account aggregation isn’t just about visualising data. Companies can use this information to better understand each customer’s needs and offer better financial products. Revolut, for example, can analyse a user’s current accounts and help identify the right credit cards, loans or overdrafts for them.
This data is also helpful for pinpointing useful offers. Using account aggregation, apps can determine how much you’re spending each month on energy or broadband. They can then suggest different providers that provide similar services for less money.
The potential for savings doesn’t end there, though. Apps like Chip use AI to analyse users’ aggregated data. It then recommends personalised savings tips that can help customers save thousands of pounds per year.
Helping with credit decisions
Aggregated account data can help users see the entire state of their finances, so it’s no surprise that companies can use it to help determine creditworthiness. Lenders may use it as an alternative to credit scores in cases where the applicant’s history is thin. This leads to faster decisions and fewer manual processes on the user’s part.
What are the advantages of account aggregation for businesses?
Consumers aren’t the only ones who gain from account aggregation, though. Businesses can also take advantage of the following benefits:
Better customer experience
A more individualised customer experience is generally a better one. As mentioned above, account aggregation allows businesses to build highly personalised services for their users. Companies are therefore able to offer products their customers are more likely to use, increasing loyalty in the process.
Faster and less expensive onboarding processes
Onboarding customers can be a complex task. Some companies need to carry out extensive checks to verify users’ identities before they provide access to a product or service. Know your customer (KYC) and anti-money laundering (AML) requirements can further slow down the onboarding process.
Since account aggregation gathers information already verified by a user’s bank, it can help confirm a customer’s identity. This speeds up onboarding processes, all while meeting companies’ regulatory needs.
How can TrueLayer help with account aggregation?
A registered provider of open banking technology, TrueLayer enables companies to take advantage of secure account aggregation services. See how TrueLayer’s data API can help you increase customer engagement and provide personalised insights.