Your money has been taken care of, Mr. Orwell
By Holden Lewis • Bankrate.com

Computer programmers are crafting software that will give you detailed financial advice and even act on that advice (maybe without you).

I'm talking about really detailed, personal advice.

For example, software that might tell you which credit card balance to pay off first and whether you should tap your money market account or apply for a home equity line of credit.

Later, more advanced software might perform transactions automatically, finding the proper balance among your needs to increase savings, decrease debt and reduce tax payments.

The work is being done by account aggregators such as Yodlee, Corillian, eBalance and VerticalOne. These companies let you log onto one Web site, enter one username and password, and see information from several sites, each of which has its own username and password. Aggregators allow you to keep track of information as diverse as bank and credit-card balances, the value of investments, and frequent-flier miles without having to jump from site to site.

Right now, that's about all that aggregators can do: keep track of information.

In the words of Jim Taschetta, chief marketing officer for Yodlee, they answer the question, "What do I own?"

After that comes the final piece of the puzzle: Making it easy to act on the advice.

That means that aggregators have to grant access to multiple financial institutions from one Web page, allowing you to pay bills, transfer money between accounts at different banks, roll over certificates of deposit, draw from equity lines of credit and apply for loans.

"Someday," says Barbara Span, vice president of StarSystems, an ATM network, "the user might have the ability to, for example, view their insurance information and checking account, make a payment from their checking account to their insurance company, or sell stocks through their brokerage and send the money directly to their checking account."

All on one Web page, using just one password.

Make money, not war
It's possible to do some of those things on the Web now, but doing so would require you to visit the Web site of each financial institution. To spare you the exertion, programmers are pulling all-nighters and missing their kids' soccer games as they frantically add features to aggregation software.

Twenty years ago, these geniuses might have been designing nuclear weapons in taxpayer-funded laboratories. Now they're trying to fatten our portfolios. They're not doing this solely for the consumers of a grateful nation; the aggregators' primary customers are banks and brokerages that want to use aggregation to increase customer loyalty. The idea is that you'll view your accounts from a variety of institutions from your Citibank-aggregated Web page, and gradually switch most of your accounts over to Citibank.

Aggregators have to work out more than technical issues. They need to get answers to regulatory questions. They have to address cultural matters, too, and deal with people's conflicting feelings about technology.

For example, when someone predicts that a software program will advise me whether to park spare cash into a CD or money market, I picture two things: Dr. Frankenstein shouting, "It's alive! It's alive!" (Gene Wilder version), and Microsoft Word's intrusive Mr. Paperclip.

How many people will avoid aggregators because they fear that the experience will be impersonal, or spooky, or annoying?

A reasonable person might worry that an aggregator could give misguided advice -- or worse yet, self-serving guidance that would profit the financial institution and not the customer. Experts point out that banks won't stay in business if they lose customers' trust, so there's nothing to worry about.

And further down the road, when aggregation software automatically pays the bills and moves your money around to get the highest return, what happens if a computer glitch sends your credit rating into freefall?

Talkin' 'bout my regulation
If you expect government to protect you, think again. No one has figured out yet how banking regulations apply to aggregators. If someone gains access to your bank account through an aggregator and steals money, no law or regulation specifies who ultimately loses the money.

Does the aggregator have to repay you? Does the bank? Or are you deemed responsible? Does the answer depend upon which Web site the thief logged onto -- the bank's or the aggregators? What if the thief is your delinquent kid, who filched your password off a Post-It Note stuck to the computer monitor?

No one knows.

Over the summer, the Federal Reserve asked for comments about how aggregators should be regulated, and it could be months before the Fed issues guidelines.

StarSystems weighed in on the issue, urging banks and aggregators to tell consumers that the regulatory questions haven't been answered yet.

"There is a need for clarity," Span says. "The existing regulations need to be reviewed and it needs to be determined what applies and what doesn't."

Afterword
When X.com went online about a year ago, founder Elon Musk's aim was to create a financial services portal that would offer checking accounts, mutual funds, certificates of deposit, lines of credit and person-to-person online money transfers. The company planned to buy a bank in Colorado.

Now X.com no longer offers new checking accounts, lines of credit, mutual funds or certificates of deposit. Instead of buying that Colorado bank, it bought PayPal, a competitor that offered a better online payment service. Musk's decision to buy PayPal was nimble, and it was smart: About 4 million people have PayPal accounts, and that number is bound to grow because it soon will provide Internet payments for Intuit, the maker of Quicken and Quickbooks.

Meanwhile, X.com's other financial offerings have dwindled. Starting in November, X.com will charge $12 a month to maintain a checking account with a balance of less than $100. Clearly X.com is encouraging people to close their checking accounts and transfer the money to their PayPal accounts.

-- Posted: Oct. 20, 2000