4 Forces Shaping The Financial Web

Teaming up with several of the world’s largest banks, global cloud accounting software company, Xero, is transforming into a small business platform which connects financial institutions, government departments and large enterprises in real-time.

By enabling small businesses to better understand their operations, it’s a transformation which has the potential to boost entire economies. Here’s a look at the four forces propelling this change.

1. Cloud has created opportunity for seamless data flows

Cloud-based software is removing friction so small business owners can interact with a real-time system of record, something that was previously only available to enterprise companies.

By creating a central platform for small businesses, owners can — for the first time — simply and easily share their information with other businesses, government, financial institutions, financial advisors, accountants and bookkeepers, to garner advice and services. Before the cloud, this could take weeks, if not months, to pull off.

Using real-time flows of financial data and automation, Xero takes care of tasks like reconciling transactions, managing payments and chasing invoices, empowering small business owners to spend less time on the books and more time growing their businesses.

2. One version of the truth

Until now, financial relationships were usually one-on-one.

But by having one system of record, containing a single version of the truth that lives in the cloud, small businesses are able to connect with multiple providers while maintaining an understanding of their overall company performance and controlling access to sensitive information.

It’s the beauty of having all your data in one place.

3. Stronger connections to accelerate business decisions

Linking technology companies and applications through APIs makes it simple and easy to access services and advice which accelerates decisions and enables both financial institutions and small businesses to become more agile.

It’s also a force which is driving the creation of the financial web. Financial integrations are core to what Xero does today and some of the largest banks in the world, including Barclays, NAB and Silicon Valley Bank, now feed directly into the platform. Integration with payments providers and processing companies is also an integral piece of the web. The third area, which is still in its early days, involves integrating with alternative lenders including Moula and Kabbage.

Today, five out of the UK’s top six banks provide direct feeds into Xero’s platform. The integration shows these large institutions recognize the role Xero has to play in the region’s financial technology sector. By integrating with the platform, banks are able to foster closer relationships with, and better serve, their customers.

Investing heavily in maintaining an open ecosystem has become one of Xero’s key competitive advantages. It’s also become a competitive advantage for many of the company’s 500+ partner integrations which have leveraged the Xero network, of more than 600,000 subscribers, to grow.

4. Bringing it all together

By unifying services you can drive better outcomes. Having a single source of truth, that lives in the cloud, means a small business’ accountant, bookkeeper, bank, lender and investor are all on the same page.

Having a single view of a customer also plays to the trend of data digitization and portability, something the banks are grappling with under proposed UK regulation changes which would enable customers to take their bank account numbers and details with them if they were to switch institutions.

Delivering a better overview of financial data can also help strengthen the UK’s economy. Many small businesses have a cashflow problem but don’t realize until it’s too late. Having a single, complete view of their financial status can help small business owners make more informed decisions.

In the broader policy context, the Government’s desire to streamline HMRC and other departments and services by shifting to a digital services model is an example of institutions recognizing how critical real-time financial data is for business success. Xero has been working closely with HMRC’s Government Digital Strategy team to ensure the UK institution’s Digital Services Roadmap, which will be rolled out over the next four years, will make the lives of small business owners simpler.

HMRC is now looking at opening up additional government APIs so software and web services can be seamlessly connected. It’s a move which will bring significant tax reporting efficiencies.

However, given the majority of the UK’s 5.3 million businesses still use simplistic paper based methods or spreadsheets to keep their books, the challenge of migrating to a digital reporting world will not be trivial. Rather, it will require the support of the cloud software industry in the form of creating compelling digital alternatives for the Government to meet its digital strategy goals.

Powering the global financial web for small businesses is a big goal for Xero, but it’s already well on the way to achieving it.