April 27, 2004

Online brokerage E-Trade Financial Corp. (Menlo Park, Calif.; $26 billion in assets) has licensed Yodlee Inc.'s (Redwood City, Calif.) Instant Account Verification software to let customers view account information from multiple banks on a single Web page and make funds transfers in real time.

This is welcome news to E-Trade customers, many of whom have a net worth of $1 million or more. Previously, when customers wanted to move funds from their brokerage accounts into checking accounts, they first had to send E-Trade a voided check. Then E-Trade would make a "challenge deposit," which meant it issued a token deposit of 25 cents into the customer's checking account. E-Trade then required the customer to document that the deposit had occurred by providing a copy of a bank statement.

Yodlee verifies the ownership of a customer's checking account on behalf of E-Trade using screen-scraping, a one-time process in which Yodlee logs on to an account using the customer's ID and password with the customer's permission.

"Real-time account validation combines effective external account-validation protocols with a system that's fast and responsive for the customer," says Robert Shenk, VP of retail banking at E-Trade.

Screen-scraping, while an improvement over E-Trade's old process, is still primitive compared with online-authentication methods incorporating Security Assertion Markup Language (SAML), an XML-derived set of instructions that lets customers sign on to any number of Web sites using a single ID and password.

The Liberty Alliance, a coalition of technology companies and users, is a proponent of single sign-on using SAML. Although a few tests have been conducted, the Liberty Alliance program is still in its infancy, says Schwark Satyavolu, chief technology officer at Yodlee. Single sign-on would make Yodlee's job easier, he says, by not requiring customers to divulge IDs and passwords, something that tends to make banks nervous.