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Banking changed when the European Parliament adopted the PSD2 in 2015 to promote online and mobile payments through open banking.  The following year, the UK’S Competition and Markets Authority ruled that the nine big banks must allow licensed start-ups to have access to their data, including account transactions.  This started and continues to revolutionize the worlds of both banking and accounting.

We say the huge growth of Neobanks, and Challenger banks, including Monzo, Starling, Monese, Metro, Amaiz, and Revolut.   Both held appeal to the investment hungry, looking for the next Fintech Unicorn. By the start of 2020, there were over two hundred regulated provided enrolled in Open Banking.  I set out to find different viewpoints on the progress.

Different points of view:

Software company FreeAgent spotted the opportunity early on that this gave other companies too.  Edinburgh based.  FreeAgent has been a leader in supplying specialist accounting software for freelancers and microbusiness for many years, and an acquisition by the Royal Bank of Scotland meant their customers could gain from the new regulations.  

CEO Ed Molyneux explains that this means accounting software can now be linked directly to a customer’s bank accountant.  This merger of banking and accounting results in real, instant accounting, more accurate cash flow forecasting.  Ed finds younger generations are adapting faster to this change while others still hang on to their spreadsheets.  The future, he says, is here, just not very evenly distributed.   

Julia Kermonde, CEO at Freelancer & Contractor Services Association (FSCA), believes that as banks change to offering software that links bank accounts to company accounts, accountancy practices will also benefit.  Up to ten hours a week of repetitive tasks will be saved. One in two accountants says this will mean less stress and boredom for them.  Business owners want to focus on growing their businesses, and accountants can now help them to do that. 

Tony Margaritelli, Chairman of Independent Certified Practicing Accountants, goes further.  He says that small accountancy practices have value-per-hour wired into their DNA as do all small businesses, so savings in repetitive tasks are a considerable cost-cutter.  He feels that this resulting is additional time will give an opportunity for accountants to share their knowledge and partner with personal financial and pension advisors and create the type of individual service that in the past has only been available to the wealthy. 

Steve Taklalsingh, Managing Director & CFO of banking app Amaiz agrees. “The best challenger banks are combining banking with accountancy and then automating the whole process.  Banking apps, like Amaiz’s, mean that business owners and their accountants can be freed from bookkeeping to focus on managing their business.” Steve also thinks that  “where the challenger banks go you can expect to see the High Street banks to follow.”

Therefore, open-banking combined with new software is not just revolutionizing banking, and the way we do our accounts, but the jobs of accountants as well. Accountants will need to adapt.

The changes are all perfect for a market in which the numbers of tech-savvy people grows, we shift to managing our lives from home, and the demand for all services to become more digitalized keeps on growing. 

Challenger bank wobble

Quite suddenly, on March 20, and since COVID-19 has hit, challenger banks’ app downloads have dropped dramatically.  Finbold reported a March drop of nearly 24%.  Monzo was hit the worst, down by over 26%.   Revolut’s figures show they too are down by 18%.  Is this a trend in reverse?

Mareke Flament, is CEO of Mettle, Nat West’s new business bank.  Mareke was appointed when RBS and parent Nat West did some major re-branding and re-naming to keep up with the new challenges in February this year. 

Mareke feels that the timing for the changes to the way we do our accounting and our banking has come at an opportune time with COVID-19 encouraging everyone to become more digitalized.  Mettle has seen an influx of people starting personal businesses or going freelance since their jobs have disappeared with the pandemic. Stats are also showing a big growth of people turning to freelance and new business. 

So what could possibly be going wrong for the new banks?  In the case of both Monzo and Revolut, both are well-capitalized.  Yet both have been subject to rumors of collapse.   Part of this apparently came from a report by the US brokerage Rosenblatt Securities, forecasting that one of the outcomes of COVID-19 would be the collapse of over-baked fintech firms that have huge valuations despite being loss-making.

The growth of seed capital being plowed into start-up and early-stage tech companies has been huge in the last few years.  Large numbers of these companies require scaling to an enormous degree to become profitable.  The gamble is high.  Successful unicorns provide the argument in favor, but realistically the successes are far and few between.


While Fintech valuations may have gone a bit crazy, I struggle to believe that it is on this basis that inquiries to challenger banks have dropped.

Could it not be much simpler:  that in times of crisis we freeze and when we do take action, it is to look for the stable and familiar.  When the world is a scary place, we become more risk-averse.  We invest in bonds, lower returns but safer.  We want people and institutions we are “sure” we can trust.

I believe that those figures are at worst an blip for the challenger banks.

Overall, the future of linked banking and accounting solutions fit with our digital lives can only go from strength to strength in the future.

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