As banks race to launch sophisticated personal finance management tools, data aggregators are developing solutions to help their bank clients paint accurate, insightful pictures of consumers’ financial lives.

“We finally have the data consistency and data quality that we want to provide these insights at a very accurate level, but also a very hyper-personalized level,” said Brandon Rembe, senior vice president of products at Envestnet Yodlee. The Redwood City, Calif.-based data aggregation and analytics platform announced last week the launch of its Insights Solutions, APIs that help banks personalize the customer experience. “What has empowered that is really our AI-based data models,” Rembe said.

Although aggregators have worked with banks to compile consumer data for years, the ability to provide personalized insights depends on a granular understanding of data. With more sophisticated analytics, aggregators are now moving further into the PFM space through B2B solutions.

According to Rembe, Envestnet Yodlee processes billions of transactions every month, presenting the challenge of correctly identifying fields like the merchant, category and location. He added that the company’s AI-based data models now have an accuracy rate well over 90%, an important threshold for providing meaningful insights. This accuracy was achieved through a combination of manual keyword searching and data science solutions. Envestnet looks at data from credit cards, checking accounts, investments and bills to help banks better understand their customers. The company has built predictive models that go beyond simply identifying transactions.  

Rembe said some common use cases for Insights Solutions are showing consumers whether they have enough funds to pay a bill, highlighting how much an Uber driver pays for gas and telling parents how much their children spend on certain apps. Envestnet Yodlee can also break down how much consumers spend on certain categories compared to peers in their region, helping consumers see if they are overspending. The company had been working on data enrichment for about four years before hitting the 90% accuracy benchmark about 18 months ago. Envestnet has been working on Insights Solutions for the past 10 months and plans to roll it out broadly in the third quarter.

“Personalization in financial services marks a critical frontier for the industry, and broader application of personalized services across sectors is accelerating consumer demand,” said Tiffani Montez, senior analyst at Aite Group, in a statement. “These types of solutions signify an important leap forward.”

MX, a data aggregator out of Lehi, Utah, works with the likes of Ally, BBVA and Synovus. The company launched MoneyMap with Pulse last April to help banks provide personalized insights to their customers. Pulse helps consumers understand how much they are spending and where, and the tool notices changes in consumers’ spending or income. MX presents its personalized insights through a B2B solution that functions like a social media feed for consumers to easily navigate.

“You’ve got to have that solid data that we build upon, otherwise, frankly, you can’t give meaningful, accurate insights to the end user,” said Greg Slade, general manager of product at MX. He added that the company’s data engineering team works to accurately categorize transaction data, as the information is often received without clear indications of the vendor or type of transaction. “One of our key capabilities is being able to bring that [data] in and help a financial institution understand what the vendor is, what the spend was, and what the category was.”

San Francisco-based Plaid, which announced in January it is being acquired by Visa for $5.3 billion, launched a solution in May called Plaid Exchange, designed to help financial institutions and their customers better manage data. According to Ginger Baker, Plaid’s head of financial access, Plaid’s APIs help connect banks, consumers and third parties to create a full-picture view of consumers’ financial lives. A better understanding of consumers can help banks and credit unions provided tailored services.

“The platform offers methods for consumers to securely authenticate and authorize access to their data, including the ability for financial institutions to stand up their own customer portals,” Baker said. “Plaid Exchange is designed to meet the rising demand of institutions that want to establish direct API connections to Plaid, so their customers can use fintech apps from Venmo to Microsoft’s latest personal financial management app.”

See also: Envestnet Yodlee inks data-sharing agreement with Schwab  

The importance of data aggregators goes beyond personalized insights, as fintechs and other third parties rely on aggregators to connect with consumer banking data. Without a regulated data-sharing standard, like PSD2 in Europe, there are concerns about security and risk when it comes to data agreements. A 2019 report from The Clearing House found that of the 54% of U.S. consumers who use fintech apps, 80% are not aware that third parties might store their usernames and passwords.

“We should continue to push for the creation of certain standards in connection with data governance and consumer protection principles,” Nizan Geslevich Packin, an associate professor of law at Baruch College, wrote for Forbes in January. “Ideally, consumers could benefit from the work of data aggregators and gain control over their data, benefit from increased competition, and enjoy innovative, but safe and secure, financial products and services.”

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