Accountants risk isolation from emerging fintech ecosystem

Accountants risk isolation from emerging fintech ecosystem

Edwin Abl, CMO at Modulr, offers insight from a fintech looking in on the accounting-tech space, especially on how accountants can act now to shape the development of automation. The payments-as-a-service company, which powers Sage Salary and Supplier Payments, recently received £14m in investment, in part to drive efforts in the accounting space.

Accountants risk isolation from emerging fintech ecosystem

Accountants must engage early with new automating technology to differentiate against the market, or risk isolating themselves in the long run from the fledgling fintech ecosystem.

Some 40.5% of accountants fear job replacement by automation, while 30% fear keeping up with new technology, according to GovGrant. Couple that with the Office for National Statistics (ONS) suggesting that 25% of chartered and certified accountants could lose their jobs, and it makes for grim reading.

However, this may be why some accountants have moved to position themselves as consultants for a specific subsector, with some even dictating the software their clients must use rather than accommodate the wide range of current software providers.

While such an approach allows for a tailored relationship and diversifies the accountant’s role beyond book keeping, it is also a short-term view, one that invariably isolates accountants from the benefits of the wider tech ecosystem. It’s a risky approach for tier two and below accountants.

One need only look at the wider finance industry to see the effects of automation, as it slims departments to reduce costs. In April this year, Santander Group announced a €20bn spending spree in a bid to “simplify, digitalise and automate” the bank and improve operational efficiency by €1.2bn. And the latest round of Deutsche Bank job cuts certainly put the words of John Cryan, the bank’s former CEO, in sharp relief when he suggested half his 97,000 workforce could be replaced by automation and AI.

The benefits for Cryan are clear: remove human error, add automated processes and enjoy the resulting cost savings.

The appetite for automation can also be quantified. Figures from Juniper Research projected the growth of the automation market between 2018 and 2023 at 27.4% CAGR. Specifically in payments, a Juniper report predicts pureplay digital companies will process $14trn by 2023 (up from $6.7trn in 2018).

It’s a huge growth market, but one that has taken its time to permeate into the nooks and crannies of accountancy.

Stuck in the mud, or head in the sand?

But permeate it will, and permeate it has. Already the industry is beginning to collide with the outer edges of fintech ecosystems, as Xero and FreeAgent work with challenger banks to bring integrated banking services to the end business customer, bringing them into the instant economy.

And with the taxman’s drive to make tax digital, automation is not only a competitive must, but a regulatory one. And that’s before income and corporation tax receive the same treatment as VAT.

To retain relevance in an increasingly competitive market and continue to focus and differentiate on delivering bespoke client relationships, accountants must look to engage with the fintech ecosystem to comply with future client demand.

Four automation wins accountants can steal from the fintech ecosystem

Our own partnership with Sage – powering Sage Salary and Supplier Payments – seeks to address key challenges in the industry:

Manual entry – The current manual process poses internal security risks due to the movement of data between Accounts, Payroll and banking platforms. This is a concern for both end users and accountants. Automate with straight through processing to receive notifications and greater visibility into cashflow and the payment process, while predetermined rules reduce the risk of manual error.

Incorrect settlement – Similar to above, incorrect settlement can negatively impact client relationships.  Software users invest time and headcount manually managing payment runs for purchases and procurement. The current process is prone to human error and represents low value work for accounts. Automation can cut out human error by 60% according to 2018 Goldman Sachs research.

Lack of differentiation – There is much competition amongst Tier II and Tier III accountants and firms are looking for ways to expand their offering and remain relevant. Modulr automates outbound payments through Faster Payments, improving speed and reliability.

Reliant on traditional banking – Many SMEs and accountants can only move as quick as their banks, often manually transferring CSV files from software to bank account. Automation allows for speed and reliability with 99% of Faster Payments processed in 90 seconds in line with our industry leading Service Level Agreements.

Whitepaper

The Future of Finance is in the CFO's Hands

Business The Future of Finance is in the CFO's Hands

4m
Save a Week a Month Consolidating Accounts

Accounting Software Save a Week a Month Consolidating Accounts

5m
Mitigating Risk Through Internal Control

Legal Mitigating Risk Through Internal Control

6m
Could tax season have run more efficiently?

Corporate Tax Could tax season have run more efficiently?

6m

Related Articles

How to use artificial intelligence today

Technology How to use artificial intelligence today

1d Nash Riggins
Grants awarded to drive SME lending and payment service development

Accounting Software Grants awarded to drive SME lending and payment service development

1w Chris Jewers
How can technology improve the client journey?

Technology How can technology improve the client journey?

3w Louise Wilson, Business Manager - Corporate
Tech CEO with Ed Molyneux, FreeAgent: 'The convergence of banking and accounting is on its way'

Technology Tech CEO with Ed Molyneux, FreeAgent: 'The convergence of banking and accounting is on its way'

4w Beth McLoughlin, Managing Editor
Firm launches new AI tool to help businesses with IR35

Technology Firm launches new AI tool to help businesses with IR35

1m Chris Jewers
Existential angst: Accountants have nothing to fear but… everything?

Management Existential angst: Accountants have nothing to fear but… everything?

2m AJ Chambers Recruitment | Sponsored
Accountancy: Is disruptive technology having an impact?

Technology Accountancy: Is disruptive technology having an impact?

2m Sabby Gill, Managing director
How to keep pace in the fast-changing world of technology

Technology How to keep pace in the fast-changing world of technology

2m T-Tech | Sponsored