Banks as app partners: The race to secure or sideline the profession
The incursion of new fintech tools into the banking arena has undoubtedly shaken up the established operators. But how is this changing the way businesses operate, and what’s in it for accountants? Richard Sergeant investigates.
It’s fair to say that many of the high street banks have fallen out of favour with accountants over the years. Key gripes include how difficult it is to open new accounts, to secure finance, and to hit acceptable levels of service.
New fintech upstarts such as Starling, Tide and Monzo, plus finance alternatives like Capitalise, iwoca and Satago have come forward to target those weak spots. These companies have attempted to tackle these deficiencies with their offerings and turn the results into key parts of their service.
The banks, in turn, are now repaying the favour by entering into the small business fintech market with solutions aimed at reclaiming some of this lost ground and to expand into new areas towards and beyond the general ledger.
Recent Xerocon headline sponsors Natwest Ventures incorporates a range of businesses tools such as Aptimise, with Santander’s Asto aimed more squarely at the small business market, and HSBC’s fledgeling Kinetic and Project Pulse to launch soon.
But why are they getting involved now, and will it be enough for accountants to become advocates of the big nine high street banks?
Sitting on their hands ‘not an option’
Andy Ellis, Head of Natwest Ventures, acknowledged that the bank had to respond to the changing climate.
“We saw the interaction of consumer, tech and regulatory change and saw that significant disruption was on the way - and that we needed to specifically develop products and initiatives slightly separate from the bank,” Ellis told AccountingWEB.
The aim, however, was not just to improve the banking experience.
“Focusing more generally on where SMEs get their services from seemed logical, as things get quite fragmented, and quickly,” explained Ellis. “They have the least amount of time to dedicate to managing their business services, especially when they have the hard job of keeping things running.
“So the exciting part is bringing cloud-based solutions to improve productivity, built and underpinned by security and expertise, and that can help keep the bank relevant”.
As a statement of intent, RBS/Natwest’s purchase of FreeAgent in 2018 could not have been clearer. However, the innovation lab approach does herald an escalation of interest, especially to attract the next generation of smartphone-based entrepreneurs, and potentially disrupting the disruptors themselves.
But how do accountants feel about this manoeuvre? Especially when the burgeoning software market hardly seems to be screaming out for even more choice.
The bank as app provider
For some, it’s a question of which software provider can effectively provide the broadest set of core services and ‘own the client’.
Carl Reader, director at D&T Accountants, believes that we are currently seeing a race for data and acquisition.
“If the banks move quickly enough, they will own the lot,” said Reader. “If not, the likes of Intuit or Xero will find a way to consolidate their service offerings, provide banking, and close the gate.”
So does it really matter who owns the tech, as long as it does the job for clients? Darren Jasper, partner at Statton & Co, believes so.
“For add-ons, no, but core GLs or practice software, yes. Call me cynical, but I don’t want banks having too much access to data and would be cautious over independence of the product roadmap,” said Jasper.
Caroline Harridence, managing director at Counting Clouds, agrees. “I share concerns about the banks and access to data, especially where they now have apps that integrate with the core software. I may be being over-cautious but it has made me look into my app selection in more detail”.
To counter this, NatWest’s Andy Ellis was at pains to reinforce that data is key to improving the whole customer experience. ”It’s the customer’s data: not ours or the firms. It’s our responsibility to ensure that customers feel that we use it safely and add value,” said Ellis.
“Within [NatWest] Ventures we will move to a world where, for example, if you on-board with our small business loans service Esme you should be able to use that [data] to open an account with our new banking app Mettle. This is about joined-up data and the customer journey”.
Perhaps we should feel that, given it’s a bank after all, GDPR and data security flaws aren’t something that even from a PR perspective they could tolerate. And, in the API-driven world of fintech, aren’t we supposed to embrace effortless data flows?
The impact on client service
On a practical level, this data flow utopia seems much of an ambition than a reality. After his recent experiences at Xerocon, Matt Flanagan co-founder of Appacus, reported an interesting point from the NatWest Ventures stand: “Of those apps that you thought may integrate or work closely within their family, they didn’t. They are still completely standalone.”
While close integrations between Esme, RapidCash and FreeAgent exist, as do many of the Ventures brands with Xero, it’s clear that there is still some way to go.
However, Ellis is clear that the benefits of increased and tighter dataflows are there to be realised by practices. “The more you can move data around, provide greater accuracy and reduce the amount of chasing and reminding, the more we are reducing the admin burden of the firm,” he said.
According to Ellis, a part of this forward-looking strategy is the role it can play as the digital tax environment evolves.
“We are trying to decrease the burden of moving data back and forth for the business and the practice. One of the ways we will do this for sole traders and small businesses is to provide FreeAgent for free when you open a Mettle account”.
From a relationship level, however, Carl Reader believes there is plenty of confidence that the banks won’t be muscling in on the higher value of the relationship anytime soon.
“Regardless of who does what in this space, the relationship of change or key influence is that between the accountant and their client, not the accountant and a relationship manager from a fintech or a bank. Accountants are the bank managers of the future”.
The future belongs to...
Automation, speed and accuracy still seem to be high on everyone’s shopping list when it comes to technology, and reducing the number of moving parts could be crucial to seeing who comes out on top.
Whether that is banks, ledger providers or something else is still open to debate. But not everyone is wary if it does turn out to be one of the high street names.
Peter Jarman, managing partner at PJCO, explains in this scenario it is the results that matter: “Whoever gets the fully automated solution first will be accountants’ best buddy and at that stage, the accountant, as an interpreter of data, will finally be able to offer real-time relevant advice to business owners to help them improve their businesses.”