UK Banking Is Set To Disappear As You Know It: Bank Feeds, Export Wars and PSD2

Christopher Simpson

Nov 19, 2017 • 4 min read

QIF/OFX/HBCI/FinTS

Financial reporting is key but it's tedious and boring, however the promise of SASS services like Sage, Xero, Quickbooks, and Freeagent are to automate the process, but always via a service called yodlee.com. Note the singular use of 'service', it's not clear in the UK market whether there is any competition at all in the syncing of 'bank feeds'. yodlee.com appears to have a strange monopoly on this. Why should yodlee have a first look at all your businesses financial tractions before you do?

This state of affairs leaves modern services like Freeagent little choice but to also get transactions via yodlee as the only middle man- which gives your financial records to yet another company for no good reason.

But then you have to question what that focus is all about- why are we obsessed with bank feeds? Do they need to exist? Read on to find out why they're redundant anyway as other markets (especially Germany) have been using better solutions since 1996...allowing customers to directly connect to their accounts.

Bank feeds aren't the point, accurate reporting is

The truth is, no matter how many 'cloud' accountancy solutions there are, they still struggle in the UK to import and match transactions accordingly. Much of this is down to lack of compatibility and lack of agreed standards in the UK financial sector, and seemly tight controls over access.

For most of the business owners I speak to in the UK, the reason they turn to these services is not just for speed: they are worried about 'getting it wrong' and ultimately wanting to trust someone else with the responsibility of making sure the accounting records are a true reflection of the business. Bank feeds don't do this. You still need an accountant. The accountant is not out of a job- nor are you as the director for that matter. The buck still ultimately stops with you, the director.

I asked KeepRight Accounting, UK based Accounting and Bookkeeping service for their view:

Technology was meant to aid people’s life but due to limitations it can only achieve a certain level. Over relying on it without traditional “thinking” may lead business to the wrong direction, which defeats the whole point of using technology. We cannot deny the benefits of using Cloud technology in accountancy world. It has certainly reshaped the industry to a new level. However, maintaining a good bookkeeping system is not just about balancing the figures. It is also about analysing correct ledger accounts and compliance of new tax legislations. None of these complicated tasks can be handled solely by technology or by a piece of software. At least not yet.”

- Yangbin, Director KeepRight Accounting Limited

It might sound silly arguing for easier access to your own banking records- what about security you say? That's true- this is a different question. Firstly, it is entirely reasonable to have easy digital access to your own bank transactions like much of Europe does, and if you don't you should leave. In Germany for instance they have already demonstrated that since 1996, it's possible to safely do this. There's an open standard to allow customers and businesses to download their transactions directly from your bank, with no middleware needed. It speaks the HBCI (now called FinTS) protocol which any compliant software may use on-behalf of the user to transact with their account. No middle man needed (e.g. without yodlee being needed), and thus more accurate reporting.

Sweden is now the most cashless society on the planet, with barely 1% of the value of all payments made using coins or notes last year (and 20% of transactions).
Jack Large - Payments update: SEPA finally delivers, and Sweden is mostly cashless

It's interesting that solutions long established in some parts of the world, are seen as innovative brand-new toys in the UK. The truth is we're lagging behind in the UK. Talk to someone in the Nordics about how seamless accounting in Xero is and they'll look at you gone-out as though you've just discovered the wheel. It's nothing new over there, it's quite standard.

In Germany, the widespread adoption of the HBCI/FinTS banking API has helped foster a strong FinTech sector, spawning startups like Fidor Bank, Figo, Number26 and Avuba, as well as the Open Bank Project. If the UK banking sector can be persuaded to adopt a similar API, it can only be a positive development for UK FinTech.

Jack Gavigan - UK Government Outlines Support for FinTech and Digital Currencies

To be continued..