FreeAgent partners with major bank
The partnership revealed today between RBS and FreeAgent has welcomed the dawn of web finance.
Starting this year, the banking group will offer FreeAgent software to its business customers. RBS believes data analytics software linked with businesses' bank accounts could initiate better discussions with business customers about their future, their business plans, and how the bank can assist this.
“One of the barriers banks face when they think about lending to small businesses is data on those businesses,” said Ed Molyneux, founder of FreeAgent. “It's very hard to get accurate data without having some kind of real time accounting system in place.”
And likewise, Molyneux explained, “many small businesses don't think about trying to access bank finance to help them grow or to get over temporary cash flow blips. Because they think the answer is going to be 'no'.”
But what this partnership provides, Molyneux said, is “if the data is actually available, and the answer is 'yes', we can increase those businesses' access to that type of finance.”
There’s been a trend towards alternative finance, with many software companies expressing overtures towards web finance, while other high street banks are in the midst of launching their inhouse branded software for accountants.
The Edinburgh-based software house has spoken with alternative lenders in the past, but RBS is the first mainstream UK bank to start this partnership conversation.
FreeAgent beat 30 other software companies in a selection process the bank ran to help their small business customers manage their cash flow problems. This is not the first big announcement from FreeAgent in recent months. The software company announced its flotation in November on the UK AIM's stock market.
Marcelino Castrillo, managing director of business and private banking at NatWest, said the new partnership will offer a “more tailored service to customers who want it”.
“When you are a small business you want to concentrate on establishing and growing, not on tracking expenses and invoicing. By offering this platform, business owners will have everything in one place, giving them valuable time back to do what is most important - establish and grow their business.”
For the FreeAgent partner accountants, Molyneux expects the partnership will welcome a large number of potential customers to the market. “FreeAgent is being provided as part of the bank account to these customers, so that lowers the hurdle in terms of customers deciding to use FreeAgent because at least from their point of view, the cost comes out of the equation.”
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Looking to the future, Molyneux sees the opportunity cloud presents, as it brings banking back into the mainstream. “We're always trying to integrate more with the banks. There are lots of things we can do which we haven't agreed yet, but the scale of the business is such that if you've got a bill in FreeAgent, why can't you just press a button to approve its payment directly from your bank account?
“Why is that a separate thing? You've got the bill in your accounting system. So you know when it needs to be paid. Why is it a separate thing to switch to your online bank account and type in all that same details again, and press the button that says pay?”
It's worth adding at this point that FreeAgent isn’t the first cloud accounting vendor to link business loans and invoice finance to data within the accounts. Nor will it be the last as web finance is becoming the new frontier for players in this market. Xero, for example, is already offering a very similar service in New Zealand in tandem with business finance partner Fuelled.
FloFunder, meanwhile, launched itself into the UK market last autumn with a similar offering to Fuelled, but one designed to operates within the client bases of individual accountancy firms. FloFunder also integrates with Xero, but made it clear that it planned to expand to other accounting systems.