Ed Molyneux, CEO and co-founder of cloud accounting software company, FreeAgent
It’s been just over two years since the term Open Banking became a tangible reality in the UK. Since then, the nine largest banks and building societies in Great Britain and Northern Ireland have signed up to take part in the initiative, meaning they must allow regulated businesses to access their customers’ financial data, as long as the customer has provided permission.
Open Banking was imposed by the Competition and Markets Authority to spur competition between banks and make customers’ banking information more accessible to third parties. And this phenomenon has already been transformative for accountancy, providing third-party financial service providers standard ways to access consumer banking transactions, and other data from financial institutions – a seamless alternative to the teetering piles of paperwork traditionally associated with accounting. Paired with other new innovative technologies, including artificial intelligence (AI), Open Banking has the power to change the day-to-day lives of accountants and more broadly, the world of finance.
This article examines the fundamental ways Open Banking and AI can and are already being utilised by accountants.
Real Time Insights
Through the use of Open Banking, accountants can have real-time access to their clients’ most up-to-date banking data every single day. This means no more chasing clients for the necessary information that you need to do your usual day-to-day work. This also benefits your clients, as they can continue with their daily workload knowing that their bank transactions are being shared with you directly, accurately and automatically. Suddenly their do-list looks a bit shorter!
Traditionally, accountants have had to deal with an enormous amount of paperwork, including invoices, expense receipts, bank statements and other important documents. Combined across the profession, this amounts to mountains of paper that have to be analysed and filed. One of the greatest benefits of technology and digital accounting is that it alleviates the stress of keeping important information in physical files. As well as less mess in the office, this means invoices, expenses, receipts can be kept in one place – online. This enables accountants to be more efficient on a day-to-day basis as they are able to easily find documentation by simply typing in what they are looking for to search for it.
Luckily for accountants, and also for the environment, Open Banking and cloud software platforms ensure that important data can transfer seamlessly and safely between your bank and your financial accounts. Already, cloud accounting software makes it possible to have one tidy dashboard that gives an overview of the business in its entirety. As well as being the guardian of files, using technology to set up a bank feed will allow accountants to track incomings and outgoings, link invoices and payments and view interactive charts of all their clients’ accounts.
Working from anywhere
The last five years have seen the progression to flexible working increase significantly. Millennials in particular have a desire to work out of the office. A survey conducted with over 19,000 working Millennials across 25 countries revealed their top five priorities when looking for a job, with 79% stating flexible working was a must. Further analysis from BBC 5 Live revealed a 74% jump in the number of people working from home between 2008 and 2018.
As well as the natural increase in the number of people working remotely, accountancy is one of the many professions being affected by the current turbulence being caused by the Covid-19 virus. This month, the government announced everyone should work from home if they can. Now, more than ever, people are away from the traditional office space and working instead from the confines of their own home, with technology acting as the glue that in many cases is keeping their business together. For accountants this means remote access to financial data is an absolute essential.
Add consultancy to the equation
With more efficient processes and easier methods of making and tracking transactions, technology and Open Banking will ultimately free up a whole lot of time for the accountants. Clearing up the calendar will make room for new kinds of work and enable accountants to spend more time on consultancy and value-added services, where previously these may have been perceived as a bonus service or from the client-side, a service at a much larger additional cost.
As well as consultancy, these technologies will have other, less direct impacts on the client-side. For example instead of needing a shoebox full of receipts, Open Banking and AI will lead to more confident and self-managed clients. If a client is keeping accurate books themselves, then the accountant no longer has to do all of the numerical admin. Rather, the value add lies in providing higher-level insights around the numbers and offering useful advice such as “it is time to put your prices up, as your profits are lower this year“.
Ultimately, AI and Open Banking are opening the gateway to a more efficient and effective accountancy industry. While benefiting the clients by making new space for consultancy and added value services, new technology ultimately streamlines an accountants’ entire job. Because they are constantly dealing with stacks of financial information, the consequences of misplacement of one document or inefficiently tracking systems hold higher stakes than usual. Luckily there is no need for accountants to grapple with old-school methodology anymore as AI and Open Banking are already readily available and at their fingertips.
HOW IDENTITY IS SECURELY UNLOCKING THE SME BANKING MARKET
By Mike Kiser, senior identity strategist at SailPoint
Have an identification card in your wallet? With a selfie and a few short minutes, you could have access to a business bank account.
Small and medium enterprises (SMEs) have long been the fuel that drives the global economy, representing around 90% of businesses and more than 50% of employment worldwide. Over the last few years, a range of financial services and platforms have arisen over the last few years to support the banking needs of these organisations. They are often digital natives and are innovating to meet the needs of their clientele.
This innovation provides great ease-of-use and rapid access to credit but also demands a careful consideration of their assumed security approach. The aforementioned scanning of an identity and a quick photo to establish a bank account demonstrates the rising importance of identity in both the consumer and enterprise arenas.
The blurring of the lines between personal and corporate identities (in this case, an individual acting on behalf of a small business) is still in its infancy. Combined with the ubiquity of mobile devices, individuals will tire of maintaining different accounts, different personas, different lives for each activity. Usability will demand that identity be reusable, portable, and secure.
This has massive implications for enterprises and the financial institutions that serve them if they seek to prevent cyber-attacks; thankfully, the same element that presents the security challenge also offers the solution: identity.
A New Vantagepoint
Just as individuals desire a single identity to unify their interaction with disparate parts of the world, organisations can use identity to grant them a single, holistic view of an individual (attributes, access, and behaviour) rather than seeing only a fragment at a time. This is particularly important for these new financial institutions—much of their technology stack is cloud-based, which often leads to splintered security approaches. An identity-based approach must be cloud-aware, and able to distil these complex environments into simple and easily governed infrastructure.
This collectivisation also allows security to use identities in the aggregate: to see what groups of similar individuals exist, what access these groups have, and what their usage of this access typically is. All of this contributes to the establishment of what normal is, whether it’s attributes, access, or behaviour. Once the “normal” is established, then the outliers—the potential threats—may be quickly triaged.
Adaptability: The New Imperative
The recent wave of change has demonstrated that financial institutions and organisations must be ready to adapt quickly to shifts in the environment. Portions of IT staff and services have been furloughed, and adjustments to new realities are essential. An identity approach that learns from the evolution of changes in the previously established areas of normality can grant enterprises the ability to see what is coming next and invest appropriately. Much like a view from an elevated position grants the ability to see beyond the normal horizon, basing a security strategy on identity makes it inherently adaptable.
Identity: Innovation and Security Intertwined
Identity, then, is a foundational consideration for financial institutions seeking to provide services for the perennially important small and medium enterprise sector. By eradicating barriers to entry that have historically kept financial organisations and enterprises apart, it is driving rapid adoption and a growing market for innovative banking. At the same time, it shows the path forward to securing those new services in a pre-emptive, adaptable way.
Now if you’ll pardon me, I must go open a bank account for my next start-up—from my mobile.
OPEN BANKING: ARE CONSUMERS KEEPING AN OPEN MIND?
Last September, the European Union’s regulatory requirement for banks to open up their payment accounts via application programming interfaces (APIs) came into effect. Since then, open banking has taken centre stage within European retail banking and payments. In this blog, Elina Mattila, Executive Director at Mobey Forum, shares insight into how emerging consumer attitudes may impact open banking services in the coming months.
It has been over six months since the revised Payment Services Directive (PSD2) came into full effect and with it, required banks to allow third party providers to access payment initiation and account information. While the regulation was designed to facilitate open banking, the market demand was uncertain. Would we, as consumers, choose to embrace the new services enabled by open banking? And if so, under which conditions?
To understand consumer attitudes, Mobey Forum and Aite Group partnered on a pan-European study to determine the appetite for open banking services amongst 1000 consumers in Finland, France, Germany, Spain, and the United Kingdom. The study, launched in November 2019, revealed many important consumer trends and attitudes, including key priorities and potential barriers for adoption.
Consumer appetite for change
The consumer benefits of open banking are largely perceived to be compelling, yet this counts for little if the providers of those services are not deemed trustworthy. This is an observation reflected in the study, which highlighted consumer confidence in service providers as critical to open banking adoption. People want clear visibility of who is managing their finances, and the overwhelming majority (88%) would prefer their primary source of open banking services to be their main bank, as opposed to other banks or third-party providers (TPPs).
Consumers also indicated high levels of trust in their current bank of choice, reflected by 77% preferring to use a financial product comparison service offered by their main bank. By enabling customers to compare the pricing and conditions of a range of financial products on the market, they feel more comfortable that banks have their best interests at heart. This is a welcome trend, and one which should be celebrated in the aftermath of the 2008 financial crisis. For the banking industry to have rebuilt trust levels in this way bodes well for consumer adoption of future innovations.
With a trusted provider, one third of consumers were then either ‘very interested’ or ‘extremely interested’ in integrating open banking services into their financial routine. This applied to specific use cases: account information services (32%), pay by bank (33%), purchase financing (25%), product comparison (35%) and identity check services (35%). Unsurprisingly, consumer willingness to adopt these services relies heavily on providers continuing to prove that they can be trustworthy stewards of personal data.
For those unwilling to adopt open banking, concerns largely focused on reservations around security and privacy. As open banking becomes more sophisticated, it will be interesting to analyse the nuances around how consumers engage with third parties. Established brands are perhaps more likely to be trusted by consumers than lesser-known online retailers. For this reason, consumers may hesitate to engage newer companies than brands they are already familiar with. In an industry as varied as finance, this creates additional intrigue in the ongoing battle for market share between the newer ‘challenger’ banks and the older, more established European banks.
Consumers might, however, be willing to deprioritise trust and, instead, favour convenience and usability. When questioned over their willingness to adopt a new payment method, for example, 91% of respondents indicated that they could be tempted to switch either by financial incentives or the promise of greater convenience.
The path forward
While open banking is still in the relatively early stages of development, it has made significant progress in a very short period of time. Not only is it allowing consumers to share financial data with authorised providers as they wish, but it is set to spark more competition and innovation within the market.
From a business perspective, open banking is expected to create lucrative new revenue streams, particularly for companies which are able to innovate quickly and react to consumer demand. It is prompting consumers to reconsider how they manage their finances and – most excitingly – it’s not even close to reaching its full potential. It should bring a whole new era of service partnerships between banks and TPPs, which will enable a new generation of innovative financial services.
For the industry to truly fulfil its potential, it is vital that stakeholders are able to explore new business models, innovations and changing customer expectations for open banking in a commercially neutral environment. Mobey Forum’s open banking expert group provides exactly this, and we look forward to supporting our members as they shape the future of digital financial services.
Where to find out more
The opportunity for open banking is explored in more detail in a report by Mobey Forum and Aite Group, entitled Open Banking: Open Minds? Consumer Appetites for New Banking Services. It provides banks and other financial services stakeholders with a market view on consumer appetites toward new open banking services and explores the possible roadblocks to consumer adoption. It is also discussed in a podcast featuring key representatives from Interac, Erste Group Bank and Strands Finance.
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