UK (and global, to an extent) SMB accounting vendor FreeAgent recently announced that it was rolling out automated bank feeds for its customers. For those of you who don’t follow the space, automatic bank feeds (the ability for a small business to have all it’s transactions show up within its accounting application every morning) are, at least from a technical perspective, a fairly logical and simple piece of functionality – in this day of widespread use of APIs, most tech-savvy folks would take this sort of thing for granted. The reality however is somewhat different – banks are risk averse and tied up in a sizeable compliance burden – letting someone integrate with your core system, even on a read-only basis, is a hard pill for a bank to swallow.
It is for this reason that when Xero launched in its home territory of New Zealand, the deal it had secured with a number of loal banks for auotmed bank feeds was just so game changing. Bank feeds are supremely useful, and by spending time negotiating the deal, Xero had given itself an awesome launching point. The global reality however is somewhat different, and it’s fair to say that Xero didn’t have the same success convincing banks outside of NZ to come on board, hence their decision a few years ago to use the Yodlee platform to run their bank feeds. this was a logical decision (Yodlee, now owned by Intuit, is a banking integration platform that already has thousands of banking institution integrated into it Clarification – Intuit’s DOES have a bank aggregation service through it’s acquisition of Mint but it’s not Yodlee).
However, we’re talking about money here and, as is always the case with dollars and cents, a higher degree of suspicion arose. This was especially so given the deftly overlooked fact that, by using Yodlee, a customer is potentially in breach of their banking terms and conditions. This is due to the fact that to use Yodlee, internet banking login details need to be given by the customer to the Yodlee platform – a fact which contravenes many internet banking Terms of Agreement.
But time moved on and, despite some concerns in the odd online forum, customers kept signing up, and enjoying the benefits that automated bank feeds can bring. Which gets us to the announcement from FreeAgent that they too are using Yodlee for their bank integration. It seems to me that, regardless of the reality of a situation, there is a point at which perception gets tipped by critical mass. Clearly using Yodlee is, by the letter of the law, a contravention of a customers internet banking terms and condition. But customers seems to be deciding (either because they are ignorant of the implications, or because they are realistic about the very low levels of risk involved) that it is worth it to achieve the benefits that integration can bring.
It’s completely sub-optimal of course. In any other industry we would be incredulous that a third party site needs to be given full sign on credentials imply to perform a data transfer – but it’s symptomatic of an archaic and compliance-heavy system that doesn’t exactly encourage innovation and open mindedness. It’s a sure bet that both Xero and FreeAgent would be over the moon if a more robust integration was possible on a broad scale, but all things being equal, for the time being they’re happy leveraging the industry default, Yodlee.
And what about the customers, should they be worried? Well I’d suggest that most customers who would balk at using Yodlee for bank feeds would also balk at entrusting their accounting data to a vendor who stores their information in the cloud. But for the vast majority, perception is actuality, and the fact that many vendors, and hundred of thousands of customers have grown comfortable with Yodlee has flipped their perception to one of safety. Let’s hope that a justified perspective.
Automated bank feeds is a great concept, but in order to overcome the problems that you are describing, one can follow an easier path: Use some data import technique which does not require an API login, nor any other program-to-program communication. What we have done in our software is just accept bank-proprietary data file import to our accounting module (yes, three banks means three kinds of file, but the core processing module is the same!). The data file is extracted from the e-Banking with just a few clicks from the e-banking user… Yes, it is not automated and the user needs to do some extra clicks, but who cares: It’s fast, easy, cheap, easy to maintain and needs no special “agreements” with the banks.
Now, some banks have gone the extra mile: They offer (again, through export files, not API’s) a paid service that incorporates more data that a plain bank statement. But, they always keep other systems physically locked out of theirs. They open up the doors only to the e-banking user, who they know how to handle, very well.
Some organizations may actually trust a service like Yodlee with IB credentials over what could be argued is a higher risk finance clerk.
Great post. Definitely an area that needs more discussion. There is so much smoke and B.S. around tech and in some industries it is hard to cut through and find actual solutions. You provide a great breakdown. This is a conversation I’m trying to further in my API Reciprocity sections. Tools like Yodlee are going beyond historical enterprise ETL. In a world of clouds and APIs, things are evolving and it isn’t always good. Keep up good work Ben.