The Cost and Impact of Yodlee on Online Banking Integration

Yodlee is a well-known name in the online banking integration sector, often touted as a leader in providing automated login services for a multitude of banks worldwide. However, the real cost and effectiveness of their services can vary significantly. This article delves into the challenges and considerations surrounding Yodlee, particularly in the context of the PSD2 (Payment Service Directive) and the integration of online banking solutions.

The Yodlee Presence in the Market

The marketing of Yodlee can be misleading, as many businesses and organizations might believe in their extensive presence in the banking sector. Yodlee offers an API for automated login services that can connect to nearly 10,000 banks. This API is utilized by leading online accounting solutions like Xero to facilitate secure and seamless logins for their users.

Despite its claims, Yodlee's reach in the Dutch banking sector, for instance, is notably limited. Upon contacting several major Dutch banks, there was little to no knowledge or interest in Yodlee's services. Furthermore, not all banks are in favor of Yodlee due to the nature of their services. Yodlee's automated login service is a prime example of the kind of service that some banks might find concerning, especially given the ever-changing nature of login requirements.

The PSD2 and Its Impact on Online Banking Integration

The Payment Services Directive 2 (PSD2) has brought about significant changes in the landscape of online banking and financial services. Under PSD2, banks within the European Union are required to provide third-party services, such as online accounting solutions, access to financial data, including bank statements, with the customers' consent.

The introduction of PSD2 is seen as a boon by many players in the financial technology sector. It provides a framework for new players to enter the market and compete with traditional banks. For example, the author has already encountered this situation in The Netherlands while attempting to connect their solution, Admini, to various bank servers. Banks initially asked for a substantial number of users before granting access, which made the process challenging.

However, with the PSD2, the process becomes simpler and less intimidating. Banks are now required to allow third-party services to access data, which means developers can start working on integrating these services without having a significant user base.

Yodlee's Role in the PSD2 Context

Yodlee is likely to play a significant role in the PSD2 framework. With the potential to become a one-stop solution for online banking integrations, Yodlee could offer licenses and cooperate with banks to provide a seamless login service. However, the success of Yodlee in this domain hinges on the approval and cooperation of the banks, many of which are wary of Yodlee's automated login service.

Furthermore, the authorization process for PSD2 is still in draft status, which means there are uncertainties and potential challenges. While Yodlee needs to obtain a license from the national bank in their own EU country, this should cover all EU countries. Nevertheless, the current application requirements are still under review, which adds another layer of complexity.

Conclusion

Yodlee's presence in the online banking integration market is significant, but its effectiveness depends heavily on the cooperation and approval of individual banks. The PSD2 provides a framework for new players to enter the market, but the process can be challenging. Developers and service providers need to consider these factors when integrating with Yodlee's services or other similar solutions.