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FreeAgent takes the lead on open banking

6th Feb 2019

Royal Bank of Scotland subsidiary FreeAgent has opened up its online accounting system to access bank data feeds via open banking interfaces.

While staking a claim to be the first UK accounting software to comply with the new open banking infrastructure that came into being a year ago, FreeAgent will test the standardised feeds with a small group of RBS and NatWest customers before they are offered to customers of other banks. This wider rollout will happen over the next year, FreeAgent said.

CEO Ed Molyneux explained some of the nuances to AccountingWEB: “The industry is in a state of transition at the moment. Most serious accounting software vendors have supported feeds for years, either bespoke ones they built themselves or through data aggregators like Yodlee.

“Thanks to the Payment Services Directive (PSD2) that landscape is changing to open banking so yodlee-style ‘screen scraping’ is becoming less viable. The big banks are also getting on the open banking bandwagon [because the Competition and Markets Authority told them to] and that’s clearly the direction the whole industry is going.”

If it’s an open standard, what’s holding FreeAgent back from supporting other banks? “Authentication journeys aren’t standardised,” Molyneux replied. “There are things that aren’t in the standard, so it takes extra work to support other open-banking institutions. It’s not quite a ‘build once, connect to many’ process as we hoped it would be, but it will get to that point over time.”

In the company’s press release announcing the new open interface, Molyneux looked forward to “a whole ecosystem of fintech apps, features and services” that will make it easier for people to run their businesses.

Banking and accounting converge

Open banking application programming interfaces (APIs) will go beyond daily data feeds and to include direct debits, standing orders and the ability to initiate payments within accounting software, he explained. This will create new customer experiences and equip accounting applictions to do more of the things that people are beginning to do with online and mobile banking, for example by aggregating data across multiple accounts, Molyneux said.

FreeAgent has been working alongside its bank parent to explore some of these possibilities, but for now Molyneux was reluctant to reveal the types of fintech experiments the company was conducting.

“We like to show rather than tell,” he said. “We will talk about what’s happening when they’re ready. What we are doing is taking logical steps to connect banking and accounting. What emerges won’t necessarily be the traditional accounting functions that you’d expect, but the premise that everything is converging together underpins all [of our experiments].”

Replies (8)

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By AndrewV12
07th Feb 2019 10:30

Why is not my bank (Lloyds) opening up an on-line Accountancy system.
Mind you its never best to be first, with such technologies they always have teething problems.

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Replying to AndrewV12:
By moneymanager
07th Feb 2019 10:56

Why doesn't LLoyds tell you that when opening a USD$ denominated business account that the only way you can get data export is to pay £150 and £50 pcm for its corporate on line platform, even when you just openend an account for a micro business (last year they did "suspend" the £50 pcm to this year while doing a review, aka as "what do we do about this cockup?")

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Replying to AndrewV12:
By johnt27
07th Feb 2019 14:57

Probably because Lloyds have a relationship with Sage, which, given the state of play in the market is surely a hindrance rather than an opportunity.

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By dgilmour51
07th Feb 2019 11:48

Quote: "FreeAgent has been working alongside its bank parent to explore some of these possibilities, but for now Molyneux was reluctant to reveal the types of fintech experiments the company was conducting."

Given 'its bank parent's' previous attitude to foreclosing on small businesses, I'm not in the least surprised that he was 'reluctant to reveal the types of fintech experiments the company was conducting'.

The only thing we can be sure of is that whatever we end up with will be primarily for the advantage of the 'parent bank', and anything facility marketed as ' new customer experiences' will be to that end.

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By Charlie Carne
07th Feb 2019 12:13

Given FreeAgent's ownership by RBS, it'd be a pretty poor show if they weren't first to market with Open Banking baked in. However, this merely replaces the direct feeds (already better than Yodlee) that Xero and QBO et al have been using for some time. At this level, it's a minor tweak rather than disruptive technology.

As I have said before, the game-changer will be when one of the bookkeeping packages leverages the power of Open Banking to allow payments to be made by the bank initiated by a process driven from the b/k software. Clearly safeguards need to be built in to protect the bank from sending payments not authorised by a signatory, but this is easily dealt with by (for example) having QBO/Xero/FreeAgent sending a payment file (containing payee's bank details, as well as amount to pay) directly into the bank, where only a bank signatory can authorise (with a single click). This allows staff at either the client or the accountant to manage the creditors and set up payments (even when the business owner would never wish them to have access to make bank payments), whilst limiting the time taken (wasted?) by the business owner to merely clicking once, instead of having to manually create each payment themselves.

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Replying to charliecarne:
By johnt27
07th Feb 2019 14:56

Agreed - the headline is misleading that this is a first from FreeAgent. It's still to be applauded but not groundbreaking.

As you say the ability to make in app payments is the next logical step and Natwest have the only product (I'm aware of) that does this, so FreeAgent are well placed. However, a multitude of apps are on the trail of this and will not have the competitive limitations/barriers that Natwest will come up against.

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Replying to johnt27:
By Charlie Carne
07th Feb 2019 15:04

johnt27 wrote:

the ability to make in app payments is the next logical step and Natwest have the only product (I'm aware of) that does this

I assume that you're referring to APtimise? I have a demo with them on Monday. Looks interesting.
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By david.bransbury
07th Feb 2019 19:03

I thought Xero had lead the way with their Open API for bank feeds which was released last November.

They have already signed up Tide, Starling Bank, TransferWise, Revolut and Soldo. Hopefully Lloyds soon (Xero - you have constantly promised but not delivered!)

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