Share this content

APIs will shatter banks' data fortress

6th Apr 2016
Share this content
iStock_Simon Bradfield_Open

When the challenger bank Mondo collected £1m in crowd funding money in 96 seconds, it raised more than a few eyebrows. But the neo-bank’s success is emblematic of a new open API era in the banking sector.

Mondo is based around a mobile app offering that links to a debit card so customers can monitor their spending via graphs, charts and alerts.

The mechanism that drives Mondo’s personal banking app is an API feed. API stands for "application program interface", a set of data exchange protocols that specify how software interacts.

Mondo doesn’t have its banking license yet, (but hopes to get that accreditation next year), so all the money spent is pulled through to the app from your current account. Mondo’s smartphone-based approach is a logical extension of the banking API movement that is taking hold within the financial technology (fintech) community.

According to Frank Woods, the managing director of Bankstream, the momentum will only increase. “There are two things going on,” said Woods. “In the last four years the British government has directed that banks must open up their data and accounts to companies like Bankstream.”

The next thing coming, he continued, is the European Union’s new Payment Services Directive (PSD2), which comes into effect in 2018. It will push the EU’s API agenda even further by requiring banks in the EU to open up their information for certain businesses to work with, allowing access to authorised 3rd parties to perform aggregation services and payments. Access to the data will be controlled by the person whose account it is, as opposed to the bank that holds the account.

APIs should make capturing clients data much simpler for accountants. “If a client chooses to have their data sent directly from their bank to the accounting software, it eliminates the hassle,” said Woods. “It will be better quality data too, as it’s coming directly from source.”

At the moment, only three of the big four high street banks - HSBC, Barclays and RBS - provide data feeds to one or more accounting packages. Lloyds has no feeds at all. These existing data feeds are closed, however, so access is patchy and requires bi-lateral agreements with specific banks.

As a result of this situation - unless they rely on a third party “screen scraper” such as Yodlee - cloud systems like Xero and QuickBooks Online can only offer data feeds to users at specific points. Standardised, industry-wide API access, enforced by PSD2, will change this.

The post-PSD2 world will also unleash other innovations. As John Lyons, RBS’s head of strategy and business development, explained recently, “PSD2 is about giving customers choice. If organisations are viewed as barriers, this won’t add up to long-term sustainable commercial success. I think success will come to banks that are technically able and culturally willing to collaborate to build exciting new customer experiences.”

Replies (16)

Please login or register to join the discussion.

By ireallyshouldknowthisbut
07th Apr 2016 11:32

.

So in summary as I have a headache, but am genuinely interested in this sort of stuff:

1. This app scrapes your bank account like Xero does using their Yoddle feeds, and give you a pretty graph of your spend, as opposed to logging into your bank account.........and actually being able to do stuff like make payments. 

2. Bank are being asked to be more helpful in this regard which may make it a bit less clunky in the future.

 

Thanks (0)
By The Minion
07th Apr 2016 11:37

no surprise

This speed of finance doesn't surprise me.

 

One of my clienst had a finance request turned down by an OSL (Old School Lender) for £50k, went home got his smart phone out and went onto a crowdfunding site. 

Having put his details in he has the whole £50k within 5 minutes. The downside is he cant remember what the terms are and whether it was him or his company who borrowed the money and no he cant remember his user name or password... :(

It just seems like the wild west with crowd funding at the moment. You only need enough people out there prepared to lend say £1,000 at 15% to get up to silly numbers with little or no security.

Cant see thsi ending well at all, client has now run out of crowd funding money and had to go back to a different site to get enough to cover the repayments which are pouring out of the bank account now.

 

Ok for a quick fix but wasn't that what credit cards were all about?

Thanks (1)
avatar
By Michael Wood
07th Apr 2016 11:52

Mondo

At Receipt Bank we gave all our team the opportunity to use Mondo from early on to get a good idea of how banking will evolve over the next few years. I would recommend any accounting firm to do the same as it really is very different from the banking experience that we all know and, as this article highlights, these changes will affect bookkeeping & accounting in time...

Thanks (1)
avatar
By rdrtaxwizard
07th Apr 2016 12:04

APIs

Golden rule...if you insist on using acronyms you must say at the outset what they mean.

 

What, please, is an API?

Thanks (0)
Francois
By Francois Badenhorst
07th Apr 2016 12:16

Hi there

API stands for "application program interface", a set of data exchange protocols that specify how software interacts with other software. 

Here's a helpful link where Steve Checkley explains in detail: https://www.accountingweb.co.uk/article/hmrcs-new-api-strategy-explained...

His explanation is in the context of HMRC's API strategy - but it holds water for API in general!

Thanks (0)
avatar
By Old Greying Accountant
07th Apr 2016 12:54

The OP does actually say ...

rdrtaxwizard wrote:

Golden rule...if you insist on using acronyms you must say at the outset what they mean.

 

What, please, is an API?

... in the 3rd paragraph!

RTFQ

Thanks (2)
By The Minion
07th Apr 2016 12:07

these changes will affect bookkeeping and accounting in

less time than you think.

 

Accountants only exist as translators to make clients records fit into the systems imposed by HMRC etc etc.

 

With a fully integrated system where the bank always balances and is by definition complete (as opposed to the old description of "incomplete records" which also analyses the spending pattern etc etc - where does the accountant fit except as a conduit to point businesses at fully integrated systems that do automatically what accountants are supposed to have been doing for years, particularly with an accounting system that is supposed to be digital (going forwards) that HMRC can link directly into and also already have the authority to take any tax liabilities straight out of the bank account.

 

All this matched with the digital tax account means that we are not that far from monthly.weekly or even daily tax returns, none of whihc have involved the touch of a human finger...

Thanks (0)
By The Minion
07th Apr 2016 12:31

so does that make an accountant a CPI?

Client Personal Interface?

Thanks (1)
By ireallyshouldknowthisbut
07th Apr 2016 17:03

.

@ The minion, I wouldn't worry too much.  

I think of the data like sewage, it will keep on running if you build a big enough drain, but you still need some poor sod to get stuck in when the sink it blocked, and no matter how fancy the system is getting the raw stuff out of your house, there is still an interface required to get this stuff clean enough for HMRC to drink.  

That is where the skill lies as an accountant, managing the data flows and cleaning it up, and automating what can be automated, and educating the client what can be 'flushed down' and what need some processing their end first. 

Currently we have HMRC and our IT friends building some lovely new sewage pipes, and trying to bolt in some nice new filters too, but all they are going to swallow is big brown turds without some  force in the middle making it all work.

That and the tax system is now so complex and full of 'bear traps' the tax role has increased measurably in the past couple of years, so I wouldn't try and retire just yet.

 

Thanks (0)
avatar
By duncanphilpstate
08th Apr 2016 11:55

following on from ireallyshouldknow @the minion

More @ the minion, as an example I don't yet see how these wonderfully automated feeds will deal with the simple situation of a sole trader depositing two cheques, one being a brthday present from his mother and the other being a payment from a customer for an invoice. If both go through on one deposit slip, will the bank be able to analyse them accurately? Will the sole trader notice if both are counted as business receipts?

(And yes, I do know someone who operates in this carefree way.)

Thanks (0)
avatar
By DSP Financial Management
07th Apr 2016 18:16

We already have to fend off - block a huge

amount of sewage, the bigger the pipes, the more cr*p that attempts to flow through. All this stuff is a mini puff, nothing more in my lifetime at any rate. Ever heard of separating wood from trees!

This stuff doesn't, and shouldn't shatter anyone's fortress without proper authority. The headline in MHO is nonsense.

As for John Lyons, perhaps he would consider removing all that superfluous floss and pop-up tosh from a client's NatWest account web page. I'll give him this credit though, at least the numbers are not the dreaded java script.

 

Thanks (0)
avatar
By duncanphilpstate
08th Apr 2016 11:59

Pay attention, Sandtander!

Well I hope this persuades Santander cards to move forward with their rather bizarre approach to customer downloads, which seem to use outdated file formats and to consider the most important part of the tranaction description to be "PURCHASE DOMESTIC" and not the name of the shop or seller.

Thanks (0)
By The Minion
08th Apr 2016 13:28

does it matter to hMRC

If someone is taxed on something that they shouldn't have been taxed on? I somehow doubt it...

 

From my point of view -at the almost retiring end of the profession it doesn't really matter to me  that much, but it should to anyone who is trying to build up a stable income stream for the future.

 

Also having spent the last two hours trying to get my home broadband (out in the sticks so dont really matter much to BT etc) when we try and call them they simply say "Who else are you going to use?" While we still have BT on our side messing up the system i cant see much of a threat at all to the status quo of bookkeeping etc etc.

Thanks (0)
avatar
By AndrewV12
16th Nov 2016 13:34

“If a client chooses to have their data sent directly from their bank to the accounting software, it eliminates the hassle,” said Woods.

Wow this bit sounds great, I suppose its way over due, but do i trust it all, security is always an issue for me. Though this crowd funding sounds very interesting.

Thanks (0)
avatar
By AndrewV12
16th Nov 2016 13:34

“If a client chooses to have their data sent directly from their bank to the accounting software, it eliminates the hassle,” said Woods.

Wow this bit sounds great, I suppose its way over due, but do i trust it all, security is always an issue for me. Though this crowd funding sounds very interesting.

Thanks (0)
avatar
By rdrtaxwizard
17th Nov 2016 16:26

I am happy to be chided by Old Greying Accountant for not reading the article more carefully, but I wonder who is reading this discussion who has the remotest idea what API actually means, in terms of what we do? What with Making Tax Digital - sorry, MTD - I am glad to be retiring next year.

Thanks (0)