As banks and software programmers embrace open application programming interfaces (APIs), Robert Lovell looks at the implications for accountants and their small business clients of a new API initiative.
New, standardised programming connections are set to shake up the traditional financial industry in the months ahead. The potential range of applications is limited only by developers’ imaginations.
Accountants can expect open banking APIs to unlock the potential value of banking data, enable new business models and help integrate a range of different software systems.
The EU parliament has adopted a new Directive on Payment Services (PSD2), which expects all banks to start developing open APIs that will let third party developers link into by 2017.
Jon Bellamy, strategic partnerships manager at Xero, has been monitoring the payment services directive and considering the impact banking APIs are likely to have.
“As yet we haven’t come across a bank which has made these publicly available,” Bellamy said. “But it’s just a matter of time before they become available. It will start to happen.”
Accountants will start to see the benefits in the way they connect with their own and clients’ banking information, according to Bellamy.
“At this moment we have bank information or bank statement data with direct feeds that are set up with banks to run simple file transfers. A big file of information is sent to Xero every night and we distribute out the individual account feeds for each of our individual business customers.
“With an API set up, that could be done far more easily. Information that an accountant requires about a business or their own business will be easier to integrate into applications which are being used,” Bellamy added. “At the moment you’d probably download a CSV file of some description and then upload it into something else. It’s not a very pretty thing to actually do. It’s probably out of date as soon as you’ve uploaded the information.
“As a consequence it is a very clunky way of showing information. Whereas with an API it’s autonomous, switched on and happens automatically. The whole transfer of information becomes a lot more seamless and easier.”
Personal tax accounts
We’ve already heard about HMRC’s enthusiasm for open APIs. With the development of HRMC’s new personal tax accounts (PTAs) the tax department can see the power of an API as a great way of exchanging information.
By building these into the new tax account, HMRC will make it easier for people with accounting systems to integrate information, pass data on or extract data.
Bellamy said HMRC was sharing basic information at the moment. But if you’ve got an application which needs that data, it should be easy to bring it in.
“It’s one less thing as a customer using that information has to think about. You don’t have to log in to a separate account or separate area to get that data.
“Longer term, you can see there will be a need to pass data back up to HMRC. Where systems have open APIs to share with HMRC it’s a whole lot easier and simple to pass that data back up.”
On how far down the line that might be, Bellamy said that was the magic question.
“It’s now about the pace of HMRC and how fast they want to open it up. If you pick up financial data on a quarterly basis there are considerations, things like stock would need to be updated on a quarterly basis, various adjustments, capital additions. There are lots of underlying questions that need to be resolved which I’m sure HMRC has under consideration.”