In the second part of a two-part series, Sooraj Shah looks at the considerations accountants should make for the introduction of open banking.
The first part of the series explained what open banking was, and how it impacted accountancy in general.
According to its proponents, open banking will allow banking customers in the UK, including small businesses, to have a range of options for accessing their financial information. This will not only help them manage their money more effectively, but will enable accountants to focus on the ‘value-add’ part of the profession.
“Open banking will stimulate greater choice for consumers – with new products and services emerging from existing providers as well as creating new market entrants,” a spokesperson for the open banking initiative told AccountingWEB.
“This will lead to new ways of managing money and, in time, will automate investment and budgeting advice. It will make lending decisions more accurate, real time and transparent. The opportunity for accountancy firms is to play their part fully in the highly bespoke ecosystems which will be created,” they added.
In many ways, open banking could help accountants keep track of small business clients, as they will have up-to-date information directly from bank accounts.
Potential negative impact on accountancy
However, while there are many benefits being touted in regards to open banking, there are some cons to go along with the pros for accountants.
Farida Rahman-Wright, Professional Standards Manager at AAT, suggested that there is potential for increased competition from the banking sector.
“Once banks are able to aggregate data through open APIs, there will be less risk of them being able to give advice, meaning they will be able to position their services as more business advisory in nature – something which could therefore have a negative impact on accountancy,” she said.
And, like many other developments in the technology space, there is an increased threat of data breaches, given that data will be able to be accessed and used more freely.
“Accountants, like other industries, need to check their cyber protection methods and ensure they have taken precautions such as installing encryption software on all PCs and electronic devices they and their staff use for work,” said Rahman-Wright.
This is a requirement under the soon-to-be-enforced General Data Protection Regulation (GDPR), and Rahman-Wright warned that if there was a system breach through open APIs, firms would not simply be able to point the finger elsewhere under the GDPR.
“Indeed both parties may be liable,” she said.
“Accountants should be acting now to ensure a data protection officer has been appointed, and that there are established reporting procedures to ensure they know exactly who to report any breaches to. As well as these risks, there is also the question of how consumers will know that the new apps and websites created are legitimate, properly regulated and supervised, to ensure that they can trust the system with their data,” she added.
Open for opportunities
While there may be challenges to contend with, there is also an opportunity for accountants to deal with new types of clients.
“Open banking presents a chance to upskill resources to fully understand the changes and implications for the industry,” said Richard Evans, partner and head of risk and assurance at national audit, tax and advisory firm Crowe Clark Whitehill.
“As the Fintech sector further develops, there is an opportunity for the accounting industry to provide support to a range of new organisations, both in terms of supporting financial decision-making and in working with a range of entrants to the sector.
“Commensurate to this is a need to consider the wider standards of the profession and whether they provide the appropriate framework in a climate of disruptive and emergent technologies and how the industry can develop in line with the pace of technological change,” he suggested.
About Sooraj Shah
Sooraj is a freelance technology journalist covering all things IT.