“The theme I use to describe what’s going on is convergence,” says Seamus Smith, Sage’s executive vice president of payments and banking.
“Data is converging, accounting software is converging, banking services are converging, technology is converging, regulation is converging. Our financial universe will be converged.”
He’s referring to the topic du jour: Open Banking. From tomorrow onwards, new joint EU and British regulations will mandate banks and credit card companies to share customer data with other companies (with customer permission).
Third party access to your bank data isn’t new. You might already use a service that logs into your account and ‘scrapes’ the data required. But Open Banking intends to make this more seamless. A body called Open Banking Implementation Entity (or OBIE) is tasked with providing standardised access to bank data.
“It won’t be an overnight flick of the switch. Yes, Open Banking becomes law on the 13th of January. It’s not like, on the 14th, our lives will have suddenly changed.”
This means a service provider being able to access your information is contingent on your permission and not whether that company has a deal with your bank. “Ultimately, this will be a good thing. It’ll drive simplicity, simplicity tends to drive efficiency, and efficiency drives productivity,” Smith says.
So you’re probably familiar with Open Banking to some extent. But for you, an accountant in business or practice, what could a post-Open Banking product market look like?
Smith and Sage have a unique insight on what’s coming. The north-eastern giant has been on the Open Banking standards working development group since its inception. At present, Smith sees three iterations of Open Banking influencing product development.
First comes the expansion of already existing products. In Sage’s case that’ll be using bank data to improve upon the bank account integrations that Sage users will be familiar with. “We’ll expand that service quickly to incorporate this ability to surface more than one account into the accounting software.”
The work with the big incumbent banks will be accentuated by partnerships with some challenger sources, too. As an example, Smith mentions the work being done with Funding Xchange, a business funding marketplace where customers can compare loan providers.
“We’re working with them to surface their services in our accounting software using the data we hold in that accounting software. The goal is to present more seamless, integrated easily accessible services for businesses for finance purposes.”
Longer term, there’s the altogether more groovy future promise of AI and machine learning.
Longer term, there’s the altogether more groovy future promise of AI and machine learning. The press has made a big meal of AI in the last year, but the technology isn’t quite adaptable enough to help businesses yet.
That said, there are whole armies of very clever people working to change this, and with the adrenaline shot of data coming from Open Banking, things could now ramp up significantly.
The AI market has been very acquisition heavy, with big players buying up AI and machine learning startups as a way to power up their future offerings; Google’s purchase of DeepMind and Uber’s buyout of Otto, to name a couple.
Sage has been doing a spot of shopping, too. Last March, it bought a San Francisco based AI startup called Compass. “They have a lot of expertise in looking for trends and insights within data at a detailed level and surfacing that as actionable insights.”
It’s in this context that the role of Sage’s chatbot, Pegg, becomes clear. Far from just being a jacked up version of Microsoft’s Clippy, Smith says the plan is to turn Pegg into the conduit for all AI wizardry happening beneath the hood.
“We’ve been doing some secret lab pieces on using Pegg as a personal bank manager,” he says. “We’re already doing beta development around can you speak to, or converse with Pegg and have them carry out financial instructions.
“Like, ‘Hey Pegg, can you find me the most competitive loan for £10,000, please’ or ‘Can you make a payment to this supplier?’, “Can you do a credit check on my largest supplier, I hear they’re having some difficulties’.”
If all this talk of data and virtual bank managers and third-party access makes you wince, you’re not alone. The success of Open Banking ultimately comes down to the market’s appetite for risk (whether that risk is real or perceived, doesn’t make a difference).
But Smith is confident. He points to our acceptance of social media into our lives, where we openly share our thoughts and private activities. “If you said just ten years ago that people were going to put their private lives on social media, you would have raised a few eyebrows. Now, it’s the norm.”
“It won’t be an overnight flick of the switch. Yes, Open Banking becomes law on the 13th of January. It’s not like, on the 14th, our lives will have suddenly changed. But there’s no doubt, in my mind that over the next 12-18 months, there will be quite a sea change in the behaviour, in the products and services and what these changes present.”
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.