How financial account aggregators fuel fintech solutions

The way consumers bank is evolving. According to our Fintech Effect Report, nearly 56% of consumers say economic factors are making them more reliant on digital financial tools. For Gen Z and Millennials, that number jumps to 65% and 71%, respectively. 

As consumers increasingly rely on financial apps, such as budgeting tools and wealth management platforms, businesses need a secure, reliable, and accurate way to connect to multiple accounts and review transaction data. The solution to this challenge is financial account aggregators. 

The next generation of financial service apps will increasingly rely on financial account aggregators to allow users to gain a better understanding of their finances. How do these tools work, and why do they matter for your business? 

What is a financial account aggregator? 

A financial account aggregator connects and consolidates financial account information from multiple sources. This enables financial service providers to create products and services based on that data, such as a financial tracking app that puts all of a user's financial data from various sources into a single interface. This process typically involves two steps: account verification, which ensures a secure connection, and transaction aggregation, which consolidates account data. 

• Account verification: The process of confirming the authenticity of a user's financial account to ensure it is legitimate and that the user has authorized access. This process is critical for preventing fraud and facilitating secure transactions.

• Transaction aggregation: Pulling detailed transaction data from multiple sources into one interface. This can be used for wealth management or personal finance apps.

An example of a product built off data sourced from a financial account aggregator could be a net worth calculator that pulls real-time data from a user's 401(k), investment app, and checking and savings accounts, allowing the user to gain a bird's-eye view of all their finances.

By enabling users and companies to access data like transactions, account balances, and spending patterns, aggregators simplify financial management and streamline financial services. 

When people discuss financial account aggregation, they are generally referring to transaction aggregation. However, account verification is a necessary step for transaction aggregation since you can't pull transaction data without connecting accounts. 

How are financial account aggregators used?

Financial account aggregators have become essential to simplify financial management and improve decision-making. They are used in several use cases, including: 

User onboarding and account funding

Because they offer best-in-class authentication, financial services apps (e.g., neobanks or stock trading apps) often use account aggregators to help new users onboard and fund their accounts. When a new user signs up for a financial app, the app will turn to an account aggregator to authenticate an external bank account, ideally via an API connection. This account connection enables users to quickly fund their new account from the external account. 

Additional data, such as account balance and fraud risk based on previous transactions, can be gleaned from the connected account to help the app mitigate common risks. 

Loan, subscription, and bill payments

Also because of superior authentication, apps and services that regularly bill customers also turn to account aggregators to facilitate payments. These providers can save on processing fees by setting up regular payments via ACH rather than credit or debit cards. Account aggregators can quickly connect bank accounts to the app or service for reliable and regular payments.   

Personal finance management (PFM) 

Personal financial management apps are among the most popular account aggregator applications. These apps and platforms access transactional data from multiple accounts to help users track spending, create budgets, and even cancel unwanted subscriptions. By consolidating data from multiple sources, PFM platforms enable users to take control of their financial health. 

An example is Rocket Money, which leverages account aggregation to categorize transactions and highlight recurring expenses, simplifying subscription cancellation for users.

Wealth management  

Wealth management platforms use account aggregators to connect accounts and offer users a comprehensive view of an individual's financial assets. For example, users might connect their bank account, mortgage provider, investment accounts, and 401(k) account to see all their assets in one platform. This enables better investment strategies and more accurate financial planning. 

Tools like Acorns and SoFi, for example, rely on account aggregators to assess a user's portfolio, recommend investments, and automate savings. In the next section, we'll explore more examples of how companies use financial account aggregation.

How Plaid provides a competitive advantage in financial account aggregation 

Plaid leads the financial account aggregation space with its secure, API-driven approach. It connects users to thousands of financial institutions, and one in three US adults has connected an account via Plaid. Most of Plaid’s traffic is from API-based connections, which deliver greater reliability, accuracy, and compliance with modern regulations.

Plaid’s tools that support account aggregation include, but aren’t limited to:

• Auth: Enables instant account verification via best-in-class APIs, which takes care of the first step of account verification, enabling users to quickly grant access to account data.

• Transactions: Provides access to detailed transaction histories, enabling applications to deliver personalized insights and spending analyses.

• Balance: Verifies real-time account balances, helping users and businesses make informed financial decisions with up-to-date information.

• Assets: Allows for verifying borrowers’ assets, which streamlines processes such as lending applications and financial planning.

These tools collectively provide a secure and comprehensive foundation for building innovative financial applications.

With 80% of traffic committed to APIs, Plaid also boasts a 99.99% uptime and a 23% higher conversion rate than competitors, making it the go-to platform for building innovative financial applications.

Solutions built on financial account aggregation

Financial account aggregators enable companies to provide consumers with a more connected financial experience. By consolidating data across accounts, these tools not only unlock personal insights for consumers but also help platforms make smarter decisions about loans and improve regulatory compliance. 

Let's explore three platforms that use financial account aggregation to deliver a better customer experience. 

Robinhood 

Robinhood uses financial account aggregation to streamline its users' onboarding process. By integrating with Plaid, Robinhood users can easily and securely link their accounts, making it easier to verify their identity and transfer funds into their accounts. Leveraging data from Plaid also allows Robinhood to assess risk and offer qualified users access to instant trading.  

SoFi 

SoFi, a financial services company that offers a range of financial products, also leverages financial account aggregation. Through an integration with Plaid, the company allows its users to gain a bird's-eye view of their finances—even if they have accounts at multiple institutions. Access to this data allows SoFi to offer personalized financial advice and improve the loan underwriting process. 

“We use data from Plaid to give our customers real-time insights into what they’re spending, what their month-to-month cash flow looks like…Without Plaid’s data, we wouldn’t be able to give members those personalized financial recommendations they’re looking for,”  

—Connie Crossley, Principal Product Manager, SoFi

Betterment

Betterment is the largest independent online financial advisor in the United States. The company uses financial account aggregation to onboard customers faster and provide more personalized financial insights. By partnering with Plaid, Betterment can help users invest their money quickly and gain a comprehensive view of their investments and spending across multiple accounts. With access to more data, Betterment can help its users reach their financial goals faster. 

The future of financial services is connected

As consumer demand grows, the future of financial services lies in account aggregation through API-driven solutions. By integrating aggregation with identity verification, payments, and fraud prevention, Plaid is helping shape the industry's evolution.

Plaid’s expansive network and user-focused innovation empower tools like Rocket Money and SoFi to build the next generation of financial services. With regulatory backing for APIs and rising expectations, Plaid is leading the way in this rapidly evolving industry.