When Envestnet acquired bank feed data aggregator Yodlee last year for well over half a billion dollars, there were a few eyebrows raised as pundits wondered how Envestnet would leverage Yodlee to deliver a return on its not-insignificant investment.
For those who haven't come across it, Yodlee is a bank feed vendor. What that means is that for anyone wanting to create a product that uses bank data, instead of having to build custom integrations into all the different banking platforms out there, they can simply integrate with Yodlee and, hey presto, bank data is theirs.
Of course, Yodlee has something of a flip side -- a long-term debate has been had as to whether Yodlee actually breaches banking terms and conditions.
Remember when you agreed not to give a third party your username and password? Well, some would argue that Yodlee's service pretty much constitutes exactly that. And, while no banks have questioned the service, it would be an interesting situation were someone to suffer a financial loss attributed to a third-party bank connection such as Yodlee.
The other issue with a third party -- and this isn't specific to bank feeds let alone Yodlee itself -- is that when a feed goes down, there is a lack of clarity as to whose fault it is. Last week the bank feed for my American Express card into Xero, an accounting software vendor, went down. It was actually a problem on Yodlee's end but there was a degree of confusion about that.
Anyway, reliability and security aside, there is no denying that connecting to the hundreds of different banks with which Yodlee is integrated, and slurping in all of that data, gives Yodlee a very interesting resource to leverage beyond simply providing plumbing.
And to that end, we see the announcement today of an extension of the "Envestnet | Yodlee Financial Data Platform," with the addition of transaction data enrichment. What this means in (relatively) plain English, is that Yodlee is applying a machine learning engine to the pool of data they collect in order to add contextual information to the raw bank data -- in this case a simple description, merchant name, category and transaction type.
This is, of course, of real value to the vendors who use Yodlee's bank feeds -- they are burdened with the challenge of hard to read, ambiguous transactions, which makes it difficult for them to parse the data -- and also for consumers to recall the transaction when it shows up on their bank or credit card statement. As Yodlee sees it, without clearly contextualized aggregated financial data, financial service providers are not only increasingly reliant on customer support teams to resolve inquiries, but they are also missing an opportunity to use this data to better understand and serve their customers.
“Consumer transactions are the most insightful data that financial service providers can harness to learn about their customers. Accurate transaction classification is vital in understanding spending and saving habits, payment preferences, and share of wallet to personalize the customer experience. Until now, financial institutions and FinTech innovators had no way to clearly contextualize transaction data,” said Lori Martel, vice president, platform product management at Envestnet | Yodlee. “With contextualized transaction data, financial service providers can offer a more customized and engaging online banking experience through web and mobile applications.”
Key features that the new offering gives Yodlee's partners include:
- Pattern recognition and machine learning to provide context to a transaction, including a simple description, merchant name, category, transaction type, fixed or variable spend, frequency, and debit or credit transaction
- Contextualized and personalized data for cleaner transactions that should provide greater insight into spending behavior
- Delivery options via Yodlee's fully hosted applications and APIs, or new DaaS file-to-file method to enrich a large or small set of transactions from multiple disparate systems on an intraday, daily, or semi-regular basis
Plumbing is highly valuable -- but only part of that value comes simply from the connection between source and end points. Much added value is created by amassing the data and learning from patterns within it. Of course, there will always be questions and concerns about privacy and security, but when appropriately anonymized, this approach should yield real benefits for Yodlee's customers, and their customers in turn.
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