I’ve been in the Financial Services industry my entire career. More specifically, I have worked in and around the Investment Management sub-sector, mostly in the Middle- and Back-Office. In all that time, I have watched the ever-increasing need for data from a seemingly infinite number of counterparties, partners, and providers. Not only is the need for, and availability of, data not slowing down, it’s accelerating.
At some point, probably before I was even working within Investment Management, someone looked around and saw that firms like Custodian Banks were each supplying similar data to their clients, but every single Custodian was providing that data in a different format than the next. So, if a company was working with one Custodian Bank, they’d have one format to handle and bring into their organization. If they had two different banks that they worked with, they’d have two to handle. If they had ten that they worked with, they’d have ten to handle, and so on. For even the savviest of companies, the management of the same data across so many different file formats could get unwieldy very quickly. Clearly, there was an opportunity for someone to offer to take all these different formats, from all the various Custodian Banks, combine the data (because it’s all basically the same data being provided, regardless of the bank), and provide this data transformation to the companies that needed it in a single format and file. Hence, Financial Data Aggregation Companies were born.
Data Aggregators have had remarkable success over the last few decades. They provide a valuable data transformation service and, as such, they have been rewarded by the industry with lucrative deals with not only the most revered firms in the world, but also the thousands that most have never heard of. These companies pay a premium price for a much-needed service. The problem is that Data Aggregators are providing their service with little transparency into their methods, systems, and means, and they are charging premiums that can no longer be justified. Between the increased regulatory pressure to “know your vendor” and the pass-through liability that can exist when a vendor does not deliver, black box solutions are not acceptable. In fact, they are a liability and a risk.
The smart firms today are recognizing that data is an asset, not merely another part of how they work and get stuff done. They see the need to understand and curate their data, so that it can be used in ways they hadn’t considered just a few years ago. They are increasingly coming to realize that the black box that they send their data into for aggregation is a liability. Both because they are on the hook if anything goes wrong within that black box and because there is value to be gleaned from understanding how the aggregation within the black box is happening.
It’s time for things to change. It is no longer acceptable for companies to allow their data to be handled in this manner. Companies must have full transparency into how their data is being manipulated between the time their Custodian Bank or other partner sends it and the time that they receive it. When there is a direct connection between them and the bank, they know that there is no manipulation of their data. When companies use a financial data transformation company, they know that their data IS being manipulated, but they have no idea to what extent. They have no visibility into the process and, often, they don’t even know what their Custodian sent in the first place, let alone have an audit trail of the transformation of their data, should a regulator or auditor ask for one. They are heavily reliant on, and trusting of, their aggregator, and that is a mistake in the environment that we find ourselves in today.
There are alternatives that don’t require companies taking up the aggregation themselves, once again. In some cases, those alternatives not only solve the transparency problem, but they also solve the problem of “paying too much” for data transformation. The reality today is that data aggregation companies’ services are overpriced. Companies no longer need to pay the premium for this service that they have become used to paying.
Your Aggregator Could Be Putting You at Risk
How long have you been using your current provider? Decades? Do you know what’s happening inside of their black box service and systems? Should you? Can they provide you with an audit trail of your data being transformed? Do you have full confidence in how they are aggregating your data?
These are just a few of the questions that financial firms should be asking themselves today. There is too much at risk to not only have confidence in your provider, but also have a strong understanding of how they are working, on your behalf. Increasing regulation for financial services companies necessitates a deeper understanding of how your partners work in providing your company with services.
Aggregate With a Transparent Service Provider
In the last few years, there have been a few innovative financial data aggregator companies that have appeared. These providers supply their services in ways that are much more transparent than their predecessors. In some cases, they don’t simply supply the service and related outputs, but give their clients access to the software that they use to perform the transformations, allowing a direct window into how the service works, is performing, and is set up.
We, at Mt. Airy Technologies, offer this service to clients. While they have the choice to use our software (Emissary) themselves, our Data Aggregation Service provides clients with the visibility into our service that they want and need, while taking the burden of building and supporting the aggregation off them. We handle everything from receipt of data from their partners to on-going transformations and maintenance, to output and delivery of aggregated data to them. If, at any point, the client decides to bring the maintenance in-house, we simply arrange to license the Emissary to them and shift them away from the service.
Bring Aggregation In-House with SaaS Software
Some of the same innovative financial data aggregation companies that supply the service will also license the software to companies interested in controlling their own data aggregation. There are several new flavors of software that can supply extract/translate/load (ETL) capabilities to perform data aggregation. Yes, there is legacy software that has been in the market providing ETL tools for years. But much of that legacy software is geared for more technical users and is not typically business-user-friendly.
Mt. Airy’s Emissary software was designed specifically for business users, not software developers. The software originated as a tool to help business analysts map and create data interfaces quickly and easily, without the need for developers. The view was that it was business users who knew the most about the data and what needed to happen with it, so why not provide them with a User Interface (UI) that would allow them to easily transform the data?
With such an east-to-use tool as Emissary, companies can, without a reliance on their IT organization, take on the data aggregation challenge internally. Business users can set up new or existing data aggregations, and tweak or adjust those aggregations along the way, should they ever change. Outputs can be delivered in any format and via several different delivery methods. Want a file sent somewhere? No problem. Need the data to be sent via API? Sure. You want to email the file automatically? OK, Emissary will take care of that for you. Those are just a few examples.
Legacy Financial Data Aggregation Companies Are Overpriced
I have had many conversations with Investment Management companies about how they are getting data aggregated for use within their organizations. Oftentimes, companies outsourced their data aggregation so that they didn’t have to deal with the headache of dozens of different files from their partners, allowing them to focus on their core business of investing.
Inevitably, that conversation moves into what they are paying a service to aggregate their data for them. This can be because the company is used to paying the premium they’ve always paid, they know of few alternatives, they are fearful of change, or they have price escalation clauses in their contracts with their aggregator. It never ceases to amaze me how much firms are paying for this service. Simply put, they are paying too much.
At Mt. Airy Technologies, we have proven that we are able to supply financial data aggregation services to clients at an average savings of about 40% of what they are paying their providers today. In some cases, this has resulted in savings of HUNDREDS OF THOUSANDS OF DOLLARS.
Refresh Your Understanding
The Financial Data Aggregation market is being disrupted, to the benefit of customers. If you are still overpaying with your legacy data aggregator, it is worth your time to explore the new alternatives available to you and to your firm. Whether you choose to reduce your costs but still buy the service or decided to bring data aggregation in-house, you can find significant savings out there. You just need to spend a little bit of time researching and understanding how things have changed since you originally bought data aggregation services.
We’d be happy to talk to you about all the ways we can help you!