'It will enable accountants to deliver more value' - FreeAgent's CCO on the open banking revolution

Kevin McCallum is CCO at FreeAgent, who provide award-winning cloud accounting software for small businesses, freelancers and their accountants. He explains how data feeds from open banking work with FreeAgent, and how technology is transforming the role of the accountant.

Can you explain how bank feeds work with the FreeAgent system?

 We’ve offered bank feed functionality within FreeAgent for a number of years For customers with NatWest, RBS and Barclays business banking accounts, these have been provided through a secure direct integration via our API – allowing banking data to be automatically delivered into FreeAgent.

For other bank accounts, data feeds have been available through a third party service we partner with called Yodlee.

What we’ve now launched, however, is the first feeds through open banking – the new framework set up by the Competition and Markets Authority on behalf of the UK Government and designed to bring more competition and innovation to financial services. It was created in response to the European Parliament’s Payment Services Directive (PSD2) legislation, which aims to make major banks open up their data and enable information to be accessed and made more easily available through third party software.

FreeAgent is the first and (so far) only accounting software to offer any data feeds through open banking. At the moment they are limited to RBS and NatWest business bank accounts, but we hope to offer them for other banks in the near future.

When does it launch?

We’ve successfully launched open banking feeds to a test group of RBS and NatWest customers in early 2019 – and will be making them available to more RBS/NatWest customers in the coming months.

What are the advantages of it?

At the moment, open banking feeds provide additional security and visibility of data for our customers. In the short term, there is minimal change to the way customers access and manage their information – but in the future, we envisage other innovative services will become available through open banking that will enable them to gain deeper, more integrated insights into their finances.

How will it benefit accountants?

Aside from the advantages listed above, a major benefit for accountants is that it minimises the risk of data entry mistakes. As clients’ banking data is delivered straight into FreeAgent, accountants don’t have to worry about whether transactions are accurate or not – which makes it quicker and easier to review the data and spot potential accounting issues that need to be addressed.

Is technology changing the role of the accountant?

Absolutely. We’re already seeing accounting software performing many of the traditional manual data-entry tasks that accountants previously had to do. Clients are able to log expenses, automate their data, manage their bank transactions and do the day-to-day bookkeeping work, which means accountants are able to review the information quickly and have more time to delve deeper into their clients accounts.

This enables accountants to deliver more value for their clients – essentially empowering them to become trusted business advisers who can offer important insights and analysis about their clients’ finances.

What technological advances do you foresee as being implemented in the industry in the next few years?

I think open banking is going to be the gateway for a lot of innovation in the fintech sector over the coming years. With an ever-increasing visibility of information and a more effective flow of data from bank accounts into accounting software, we could see a new wave of apps and services being developed that make the process of financial management – and running a business in general – much easier.

This could lead to some interesting ecosystems developing – for example insights that help identify when a business’s cashflow is running low and a tax bill is coming up, and then provide the option to facilitate a loan. Or that help to identify any late or non-paying clients in advance and enable you to secure insurance against these invoices. There’s a wide range of possibilities that could dramatically improve the lives of millions of UK business owners, which is very exciting.

What would you say to accountants who have been hesitant about implementing technology in their practices?

There’s no doubt that digital technology is already playing an increasingly-prevalent role among accountants, and this trend is only likely to continue. With the government embarking on its Making Tax Digital strategy – which will require VAT-registered businesses to keep digital records and submit VAT returns via software from April 2019 – it will become harder for practices to resist technology and rely on traditional accounting methods.

Over the next few years, the scope of MTD is also expected to widen further and incorporate other UK business taxes. This means that unless you’re running the smallest kind of business with the most minimal of accounting requirements, there’ll be little alternative to using some kind of software to manage your finances and file your tax returns. Accountants, therefore, are going to have to be proficient with that kind of technology if they want to maintain their client bases.

Waiting to see how the digital revolution plays out before committing to technology is no longer a realistic option for accountants. If they’re not already offering some kind of software solution for their small business clients, time is rapidly running out to do so.