Your Firm & Open Banking Apps—Here's How to Take Full Advantage

Remember going to the bank? We used to do it all the time for virtually every financial task related to our personal and corporate accounts. There’s still nothing quite like the whooshing sound that goes with sending a deposit through one of those pneumatic tubes—it felt so futuristic!

But times have changed, and so has our technology. In fact, banking has taken on a completely new tech identity over the past couple decades, and now digital banks are on the rise with lower overheads that lead to lower fees for clients. This has pushed banking into a competitive space—and it’s impacting more than just the costs.

Open banking, also known as open bank data, allows for third-party financial service providers to access all transaction, banking, and financial data. This open bank data means better integration with pre-existing tools, easier connection of account data, and even better support from third-party financial services like loan aggregators. 

Essentially, open banking apps simplify every process that requires banking information and history from financial institutions.

But this change hasn’t been without its roadbumps. Big banks have been a bit slow to embrace open banking, even though their smaller competitors are already doing so. As a result, the value of open banking has sort of plateaued. For now.

This presents a big value opportunity for accounting firms everywhere. Open banking is widespread enough that there’s value in adapting to it now—especially since your clients are likely already seeing its impact on their existing tools. But it’s also far enough ahead of the curve that learning to use it will be a differentiator and competitive advantage.

So let’s take a closer look at open banking. First, we’ll go over how open banking is affecting the accounting industry, then we’ll cover the crucial changes you can make to gain efficiencies and boost your client advisory services.

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How Open Data Banking Affects Accounting Firms

The main takeaway with open banking that we want to stress in this article is that it makes data more accessible to everyone—your clients included. That’s not a bad thing, but it means your firm needs to know how to approach it to drive higher-value sales. 

But before we get into that, let’s take a look at some other relevant considerations about open banking.

Personalization of lending marketplaces

Loan offerings are the product of a lot of risk analysis based on the information a business provides. But what if the lender had perfect information? I.e., they can see the full picture right down to individual transaction data in every bank account.

As a couple examples, lending marketplaces like Fundera and NerdWallet already help businesses pick the best options for credit available to them. With open banking, businesses will have new opportunities to completely personalize loans and credit cards based on their own activity. This will increase the accessibility of capital with payment rates and schedules specifically tailored to the business (not to mention the impact on their credit score).

And yep—you guessed it: with that extra capital, businesses will need guidance on how to maximize the return.

Automation of accounting-related services

The fintech space is a hotbed of collaboration: an SMB can now have their bank data integrated with their bookkeeping software. In this same space, their payroll information is automatically imported and adjusted for. As they sit down to generate invoices, their accounts receivable are immediately updated. 

The point is: SMBs have myriad tech options available to help them streamline their financial operations. As a result, accounting firms need to boost their service offering to stay competitive and provide actual value to their clients.

Streamlined accounting tools

Speaking of streamlining—financial and accounting tools are already being built around open banking integrations to make accounting advisory services easier. 

Imagine being able to forecast and change course the second a bank processes a transaction. Or doing bookkeeping with real-time reconciliations and categorization suggestions. Not only would your life as an accountant be made easier, but it would be error-free, too!

Combining automation with open banking allows you to import transactions and provide categorization suggestions and auditing via machine learning. These tools empower business owners with more thoughtful and effective decision making, and ideally they’re maximizing the impact by working with a trusted accounting advisor at the same time.

What we’re saying is that your firm can leverage open banking data as a brand new opportunity to increase revenue through value-based advisory services. You can find and expand on big efficiency gains to capitalize on growth opportunities for your clients.

Meanwhile, business owners will have access to a near excessive amount of information. With an untrained eye, this information can result in messy, valueless reporting and confusion. After all, only 40% of business owners consider themselves financially literate, which is why SMBs so desperately need the support and guidance of experienced accountants!

Truly, the gaps in client knowledge are opportunities to sell your know-how (so long as you avoid the common pitfalls).

Pivoting Your Firm in the Age of Open Banking

Now let’s jump more into how your firm can use open banking data to create more capacity and advisory opportunities.

Open banking is the new reality

First off, it’s tempting to think of open banking as something long on the horizon, but the truth is that it’s already here!

We live in a culture of immediacy. Open banking reflects this new demand for information that’s adapting at the same whiplash speed that business happens. Really, the more that open banking is adopted, the faster that we’ll all expect financial products and services to be; we’re already seeing that reality in the fintech space, and SMBs are similarly adjusting their expectations.

To keep up with the changing landscape and remain relevant, accounting firms will need to use technology to maximize their service to clients. 

Technology can improve your service offering

Business owners and accounting firms alike benefit from tech integrations, but in different ways.

Take for example bookkeeping. In the past, you’d need someone to go through all transaction activity, make journal entries, confirm balances—these are all tasks that aren’t mentally challenging, but they require an attentive eye. 

But the beauty is that now, all of that work can be completely automated. Just like that, you’ve increased the capacity of your team, one of the most pressing needs of the modern accounting firm. This new capacity can be redirected toward the real money-making tasks—ones that can’t be replaced by tech.

The big boost that open banking lends to accounting is time; accountants can redefine their roles to focus on higher-value services and help clients better manage their finances. Here are a few ideas:

• Scenario planning: Provide extra value to the financials you deliver by forecasting how changes can impact the business plan. Identify potential changes to the market or tax law that alters the best plan of attack.

• Funding preparation: Whether it’s looking for new investors or a loan to reach that next step, help your client prep the necessary documents and a business plan that makes an impact. Walk through what investors and creditors could take a critical look at and how to talk through it.

• Payroll planning: The labor market is constantly changing. Pay structures, benefits, and stock options all need to consistently adjust to stay competitive and attract talent. Help your client put together a pay structure that’s both affordable and enticing.

• Advisory services: The amount of data at an SMB’s fingertips can be overwhelming. Without some level of financial know-how, the reporting will be valueless. Pivot your services to focus on what it all means beyond numbers on a page.

The important truth about the open banking ecosystem is that it is/will continue to shape financial technologies in the very immediate future. And for a firm to remain competitive and proficient, it will need to adapt and shift focus toward providing value beyond the reporting.

SMBs have access to this same technology, but that doesn’t mean they fully understand how to use it. Accountants, however, can use it to find new efficiencies that open up firm capacity and prioritize the services that can’t be replaced by technology. If you embrace the fact that the role of the accountant is changing from reporting the data to providing meaningful information from the data, you can flourish in this new future. 

To discover how truly powerful automation can be for your firm and your clients—especially when leveraging open banking data—you need to get a general understanding of how artificial intelligence and machine learning work in accounting. Click below to check out how accounting advisory benefits from the use of automation.