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FreeAgent partners with major bank

19th Jan 2017
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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.”

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.

Replies (8)

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19th Jan 2017 22:15

Good move from Free Agent. They will begin losing public sector contractor clients when the new off-payroll working rules come in from April 2017. They will lose even more clients if these new off-payroll working rules spread to the private sector in April 2018. Small businesses are going to be Free Agent's new target market going forwards (rather than these micro contractors).

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By jon_griffey
20th Jan 2017 11:23

What you will find is that inexperienced new business owners who open a bank account will have Freeagent foisted on them as the bank staff will be expected to push it. Bank staff are not accountants and so are not well placed to make any judgement as to whether it is actually suitable for the nature of the businesses. You need an accountant involved at this stage.

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By Sheepy306
20th Jan 2017 11:25

Well done FreeAgent, some very good marketing/distribution for them.

Will RBS/Natwest have real-time access to their customers data? Or will the bank just ask them to run off a few reports that are needed?
Either way, it's 1 thing having real-time cloud software, it's another ensuring it's 100% accurate and up to date.

I'm also envisaging lots of questions from the bank along the lines of..........why aren't the figures I'm looking at similar to last year's filed accounts? Oh that'll be because I'm a very busy engineer and not an accountant/book-keeper, so I don't update accruals, prepayments, work in progress, stock adjustments, depreciation, deferred tax, loan interest, dividends, mileage, use of home/charge to company. So you can't really rely upon them.

A positive step and if it encourages sensible bank lending then that's great, but as long as everyone knows the limitations of it all.

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By raybackler
20th Jan 2017 11:28

Maybe the banks are waking up to the fact that a software link will lock in customers

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By Charlie Carne
20th Jan 2017 11:37

Ed Molyneux wrote:

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?

I agree and, if Molyneux can persuade RBS to accept a transaction request posted from within FreeAgent, that will be a massive time-saver for its users.

In order to preserve security and division of responsibilities, I would expect such a request to be received by RBS as a payment pending authorisation. In this way, the company bookkeeper can process the payments in FreeAgent and then the bank signatory (which may well not be the bookkeeper) need only log into RBS and choose whether to authorise each payment. Access to FreeAgent alone will not, therefore, allow payments to be taken from the bank account, but the signatory (perhaps a busy CEO in a small company) need not waste time setting up all of the payments, but need merely check what has already been set up by the bookkeeper.

I hope that it won't be long before all of the major banks accept this method of setting up payments from within connected accounting software.

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Adrian Pearson
By Adrian Pearson
20th Jan 2017 16:55

Sounds good but it's hardly "the dawn of web finance" and, anyway, I'm not sure how this news is any different from this news

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By Ken Howard
22nd Jan 2017 17:17

The govt/treasury plan to bring limited companies into the "cash accounting" regime eventually, so there'll be no need for accruals, depreciation, stock adjs, etc., so, looking to the future, the FAC data based on bank live feeds WILL match the published accounts to Co House etc.

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Glenn Martin
By Glenn Martin
23rd Jan 2017 09:53

I suppose this is a natural progression but will it mean that all customers of RBS, have to use Freeagent to get best out the system or will they be doing similar arrangements with other software providers.

Also I am not sure a good a tie up RBS would be? They carry a lot of baggage still from the crash and the operation of their GRG team, I am suprised if they get much in the way of new business?

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