By James Phillipps The cost of providing pension valuations is set to fall with the arrival of a ...
By James Phillipps
The cost of providing pension valuations is set to fall with the arrival of a technique known as "content aggregation".
Content aggregation, or screen scraping, is the technique of pulling together client information from a variety of sources on to one site, a concept that has implications for both business to business and business to consumer service providers.
The Department of Social Services, along with pensions and life companies, is set to head down the aggregation path as it is forced to provide individuals with a complete overview of their pensions entitlements within five years, in order to fulfil the Government's combined pensions statement requirements.
Independent internet analyst Paul Quinn said: "The DSS has to become an aggregator. Within five years it has to provide people with complete pension provision entitlements and they will have to pull this information from more than one source."
Although there is a lack of understanding among pensions and life companies about the impending changes, data aggregation will provide significant cost savings to them, Quinn said, particularly in the case of stakeholder pension schemes.
He added: "The pensions and life companies are not really aware of it. Currently, though, more than 60% of their providing costs are incurred by giving single valuations.
"Stakeholder is not a principal driver behind aggregation but it will provide welcome cost savings given the commission structure."
Given the scale of the undertaking the DSS is facing, electronic delivery must be considered as a means of reducing the administrative burden. The costs are minimal, said Quinn, as the technique involves simply grabbing the data on the screen, taking a screenshot in effect, which bypasses system integration problems.
The technique has been in use in the US for more than a year, pioneered by such technology companies as Yodlee and Corillian. It has primarily been used in the business to consumer format, enabling customers to check their financial portfolio through a single password without having to visit all of the individual websites of the product providers with whom the end user has holdings.
However, the concept has met with limited success, enrolling just 120,000, as it requires users to give their password to a third party and introduces further security fears as sensitive information is required to make one more journey through cyberspace.
The technique was also introduced in Germany, Mark Taylor, director of strategic alliances at Egg, said. Aggregation proved unpopular, however, as German investors proved reticent when it came to divulging their password to a third party.
"Deutsche Bank in Germany used an online aggregator, Moneyshelf, in Germany. It did not catch on, though, because the Germans did not like the idea of giving out their password," he said.
After limited success targeting the consumer market, Quinn believes companies will prefer to sell their services to the business to business market, with the pensions and life market providing an obvious target. He expects developments to be seen within the industry in the next six months.
He said: "In the UK, there is a real need for aggregation in life and pensions and the industry is already accustomed to providing that information to third parties, the intermediaries."
The banking sector, which was the primary target of aggregators entering the German market, will provide a lot more problems in the UK in terms of regulatory issues, according to Taylor.
He points to the problem of clients giving out their password to third parties, which is technically breaking the bank's terms and conditions.
"There is an interesting dichotomy brewing over this. Banks don't want to be seen to be restricting the free flow of data, which is the customer's data, but it breaks the bank's terms and conditions and they also start to lose control of their customer relationships," he said.
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