Finance
Open banking – the key to the digitalisation of accountancy
Global Banking & Finance Review®
Company
By Mike Panzeri, General Manager UK, Moss
Mike Panzeri, General Manager UK, Moss
Since its inception back in early 2018, open banking has given rise to the practice of open finance, a concept that enables organisations to share financial data in a collaborative way. As a result, this has enabled bank account owners to share their financial information with licensed fintech players and new market entrants who can then use this plethora of consumer data previously held by major banking institutions to create new innovative solutions and services.
A recent open banking report found that improving customer services and launching new digital services were amongst the most important objectives of open banking according to 36% of consumers in this report. This collaborative model of open finance has so far accelerated innovation within fintech and the wider financial services space, particularly in the accounting sector – a segment in finance that could meaningfully benefit from it. With open banking continuing to reshape the global financial services ecosystems, we take a look at how this has so far specifically affected the accountancy sector, and how it can potentially revolutionise a historically innovation resistant area of finance.
Traditional accountancy – old habits die hard
There was a period in time when people used to carry around pocket maps to get around places they weren’t familiar with, whether it was for locating the offices of a new client you were meeting or simply finding the exact location of the hotel you’re staying at, your attendance would simply be at the mercy of a now obsolete everyday item. Fast forward to today, and one cannot help but wonder what life used to be like pre-Google Maps. When we think about the world of work, you will find a plethora of similar examples of outdated processes and ways of working that were once considered the norm at the time.
In accountancy, what was once considered a game-changer in spreadsheets is now viewed as a less than optimal, archaic, and risky way of processing data, with 64% of today’s accountants citing increased efficiency as one of the top reasons for their increased digitisation efforts.The rise of digital or cloud-based accounting solutions exemplified the next sequence of process enhancements that are generating greater efficiencies, increased productivity, and reducing incidences of error for accounting personnel. However, this has resulted in accountants using multiple different, non-cohesive solutions for different processes, including the use of specialised software for tracking receipts, invoices, bookkeeping, and tax returns. Furthermore, whilst these processes enabled easier access to data, the data would often be flawed and would be at the mercy of accurate manual extraction, and even better Optical Character Recognition (OCR) reading and processing, which often had mixed results. As a result, many accountants, despite digitising their processes, are now finding themselves not maximising the efficiency of their processes in the way that they originally intended to.
What many accountants are yearning for is a single automated platform that is able integrate and map out all existing accounting systems and structures. This is where technological innovation such as open banking comes into the fold where it can create opportunities for flawless data, with perfect information derived directly from customer bank accounts.
Open banking – a new dawn for accounting and spend management
Brought forward by a combination of government regulation and market competition, open financial data has levelled the playing field within the financial services sector and has enabled fintechs and other start-ups to gain access to previously restricted financial data in an effort to foster greater levels of innovation.
As a result, we’ve seen the introduction of many revolutionary new financial software solutions including the accountancy field which is currently experiencing an influx of cloud-based solutions, all of which come with their own unique product offerings. SME’s that are experiencing high levels of growth are also realising the need for a consolidated tech stack meaning that the demand for an all-in-one solution for flawless finance is higher than ever.
A seamless approach to data
Open banking has had a significant impact in the payments field especially when it comes to spend management platforms. It has enabled the integration of faster, smarter, and more secure payments processes with existing accounting ones such as accounts payable, accounts receivable, expense management, and payroll. As a result, this has paved the way for far more efficient and seamless tracking and processing of transactions across entire businesses.
At a granular level, open banking can enable finance teams to easily access the financial data that consumers provide them with to achieve greater visibility of processes and easily approve the use of credit cards and financial loans. This combined with first-in-class software solutions can help finance personnel to streamline the business spend management process by readily establishing and configuring numerous spending policies, personalised approval systems, automatic receipt collection/allocation, as well as real-time payment data classification all via one dedicated hub. Prior to open banking, all these processes would not have been so easily carried out without the seamless access to consumer financial data that it provides them with.
Thanks to open banking’s seamless approach to gathering, processing and deriving financial data insights, and its ability to connect financial institutions with smaller market players, accountants and finance teams now need to embrace the opportunities that open banking has presented to the market. In order to gain new customers and retain existing ones, accountants need to consider the ways in which they can utilise the power of open banking applications to simplify financial data management in their business processes, and provide increasingly unique customer experiences. While open financial data has given accountants and finance teams access to a plethora of new solutions and ways of working, they must consider the right innovative technology that is able to give them what they need in terms of customer convenience and business efficiency.
Fintech, or financial technology, refers to the integration of technology into offerings by financial services companies to improve their use of financial services.
Digital accounting involves using cloud-based software and technology to manage financial data, automate processes, and improve efficiency in accounting practices.
Spend management is the process of managing and controlling a company's spending to optimize costs and improve financial performance.
Financial data management refers to the processes and technologies used to collect, store, and analyze financial data to support decision-making and compliance.
Explore more articles in the Finance category
