By Rick Morgan
Originally published by Bank Innovation
“[Schwab] clients are going to have more consistently reliable data access because the data comes through an API instead of screen scraping,” said Brian Costello, vice president of data strategy and strategic solutions at Envestnet Yodlee. “The API is designed to be consistent. The data is real time.”
In addition to Schwab, Envestnet Yodlee has inked partnerships with JPMorgan Chase and Citibank in the past eight months. According to Costello, major firms entering into these agreements opens the door for consumers and small businesses to feel comfortable sharing their financial data with third parties.
Envestnet Yodlee isn’t the only data aggregator making headlines this year. In January, Visa acquired data aggregator Plaid for $5.3 billion. Plaid connects financial data to some of the biggest names in fintech, including Venmo, Acorns and MoneyLion.
According to Costello, Envestnet Yodlee differentiates through its enrichment of consumer data for its partners. The company normalizes financial data to make it readable so third parties work more seamlessly for consumers. According to Envestnet Yodlee, the company connects with more than 1,200 financial institutions and fintechs, “including the vast majority of the top 20 U.S. banks.” Costello added that the company offers a better experience for developers, who are able to access 27,000 data sources through a single set of APIs.
Through Envestnet Yodlee, Schwab clients can securely share their account information with third parties who need access to the data to enhance their services. The data aggregator accesses the information through an API instead of screen scraping, which is the practice of sharing online banking credentials with third parties so they can login on the customers’ behalf. API-based data sharing is considered more secure than screen scraping because consumers don’t have to share their credentials. There is also often a lag between when transactions are made and when they show up in online banking; API-based data sharing eliminates this lag and presents data to third parties in real time.
Schwab, headquartered in San Francisco, has $3.85 trillion in client assets under management. Clients must consent to have their data shared, and the information will be tokenized for security. According to Costello, Schwab is the first major wealth advisory firm to enter into an agreement with a data aggregator. He added that most consumers at a firm like Schwab can benefit from better data sharing but have trepidation around giving out their credentials.
“This is really going to help those folks take advantage of personalized solutions with their Schwab data,” Costello said.
Although the company said in a statement it doesn’t “comment on rumor or speculation,” there was speculation earlier this year that Envestnet might sell Yodlee and its data aggregation business after the massive deal for Plaid. During an earnings call in February, JPMorgan analyst Will Cuddy called the speculation the “elephant in the room.” Envestnet executives, however, said they were committed to expanding Yodlee’s business.
“Envestnet is executing and we see tremendous opportunities to continue investing in our business, both on wealth and also in data,” said interim CEO Bill Crager at the time. “As an industry leader with about $1 billion in revenue today, we have a long runway for growth and value creation, value for our customers, value for our employees, and value for our shareholders.”