Aggregation — this term has three definitions:
- In futures markets, a combination of all positions which are controlled by one trader.
- In accounting, a way to consolidate the financial data collected from the different entities.
- In data analysis, a compilation of data from different sources.
What is an account Aggregation
Account aggregation provides the opportunity to manage all bank and investment accounts in one personal account. Financial advisors apply special software to gather data from all client’s accounts. They provide the client with compelling data to present the complete picture of the client's financial situation.
Financial planners work with two types of accounts: managed and non-managed. A managed account is supervised by the advisor. A non-managed account is supervised by the access person or their related persons in which reportable securities may be held. They are necessary for the financial plan of the client.
To control them, planners use portfolio management and special software to access the client's data by direct link. The client should give an advisor full access to their accounts and let him understand the whole financial situation.
Aggregation is widely used by financial advisors that service the accounts and consult the clients on their savings. Knowing the information from all the client’s accounts, the advisor can see the full picture.
How Aggregation work
Third-party providers (TPPs) offer the services of data storage and consolidation. With the consent of the user, they can get access to the financial data via Account Information Services (AIS). After this, the provider can receive the data straight from the client’s bank account, process them and create the financial forecasts based on this data.
The service analyzes the main spending of the client and based on this, it offers various financial and credit programs. Also, the service shows advertising information with offers from various banks. To avoid unnecessary advertising, the client should indicate which banks are allowed to access the account.
When it comes to analysis, the program follows three basic steps — extract (data extraction), transform (data preparation), and visualize/analyze (data analysis and its visual representation).
Why Aggregation is important
The method of account aggregation helps to fulfill several essential tasks:
- Aggregation allows the planner to control all accounts of the client.
- Aggregation helps to group the assets into different categories.
- Aggregation helps to estimate the level of risks and profitability of the assets.
Data aggregation is useful both for the bank and for the client. When the client uses the special software or service, they receive the possibility to analyze the financial situation, see the main items of expenditure and control the finance.
As for the bank, the data aggregation allows the bank marketer to select the most suitable financial products and credit programs. Also, the software helps to track suspicious activities on the account and prevent fraud.