Accounting for unintended consequences ☁️

Sarah Hiraki

 · 11/08/2019  · 11/08/2019

On the 14th of September 2019, the PSD2 directive came into force. It is designed to give you control over your financial data by allowing you to share it with third parties if you choose to do so. Whilst broadly welcomed for supporting innovation and competition in the market, there are some consequences arising from changes to the way some customers connect their bank. To be compliant, many banks need to rewrite the software that allows customers to access their accounts online and this means that some SMEs are no longer getting automated account reconciliation feeds into their cloud accounting software.

Automated access to bank accounts disrupted

The European Banking Authority (EBA) noted earlier in the summer that complexities around doing this may impact banks’ ability to offer online banking and suggested exceptions to enforcement whilst these were overcome. In the UK, the FCA has given banks until March 2020 to be compliant.

However, several of our accounting partners have flagged that small businesses are finding the automatic bank feeds they rely on to keep accounting software reconciled with their accounts have stopped working.

Leading accounting software firms including Xero and QuickBooks have published articles outlining the expected timescales for finalisation of revised bank APIs which will allow them to resume automatic reconciliations. In a number of cases they have highlighted the need for some customers to manually upload statements in the meantime. This takes time and resource that SMEs can seldom spare and increases the chance of errors.

Leading banks in Ireland among the worst affected

What these articles reveal are major discrepancies in the readiness of different banks. Some are not expecting to have updated APIs until the end of the year and others have not even confirmed target dates. Banks operating in the Republic of Ireland seem to be among the worst affected.

For example, Xero’s advice to customers of the Allied Irish Bank (AIB) in the Republic of Ireland is to manually import statements from 14 September 2019 since it is unknown at this time when the new API will be ready. For SMEs using these banks this means many months of uncertainty, and extra time and resources needed to manually download bank statements and then import them into their accounting software.

The role for accountants

How can accountants help their customers in these situations? What advice can they give them?

Firstly, let us reassure our Revolut Business customers: our APIs are fully compliant with the new regulations and have not been disrupted. Built from the ground-up as a modern, online bank, we do not have the baggage of legacy systems to painstakingly update, and our systems were created in full understanding of the requirements of PSD2.

For accountants with clients using other providers, the risk is that they end up bearing the burden of much of the extra work stemming from the loss of automated feeds. Some clients may come and ask for help directly – which could lead to additional service and support revenues. Others may not notice and only realise at the end of their quarter that charts of accounts and bank balances do not match. Others still may get into difficulties with errors, lost transactions and variations in accounting codes. All of which can lead to more work for their accountants.

So, step one is to make sure your clients know about this issue. Do they know the status of their bank’s move to PSD2 compliant APIs? Have they taken the correct measures to stay connected? Can you help them ask the right questions and find the right answers?

Secondly, are you prepared for the additional work that might result from a change in the connection between your client’s bank and accounting software?  You might offer practical help and advice to clients to manage the manual imports, perform extra checks and look for errors in uploaded data. How much of this is chargeable and are there new services you could create?

Finally, now could be the time to work with SMEs to review their banking relationships. Are they getting the services they need at a reasonable cost? Could they save time and effort through newer integrations with a wider range of applications? Would they benefit from innovative solutions for expense management, multi-currency accounts and payments?

Tailored end-to-end solution for accountants

Revolut’s Accountant Partner Program helps you save time and money for your own practice as well as for your clients. Working in partnership with one of Europe’s leading fintechs will help you build your business and service your clients more efficiently. Not only can we help you set up client accounts in minutes, but you can access all of them with a single login. Seamless integration to Xero, QuickBooks and FreeAgent means pain free accounting for their business and your practice. Dedicated partner managers are there to help when you need them.

Open Banking is happening, and there will be some pain as implementations happen. But, together we can help your clients stay on top of this and future regulatory changes.