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Spotlight on Codat: Peter Lord on APIs, data sharing and the future of accounting platforms

  • Suraya RandawaBy Suraya Randawa, 
  • May 24, 2018

In the third feature of our Spotlight Series, we asked Peter Lord from Codat about APIs, data sharing and how accounting platforms can remain as the primary financial tool for businesses.

Codat makes integrating with accounting platforms easy – their primary offering is an online portal and API that enables software and financial providers to smoothly integrate the underlying account data on their customers. The data flowing from and to each accounting platform is presented in a standard format that functions in both QuickBooks and Sage.

Ultimately, Codat aims to reduce the amount of time spent integrating different accounting platforms by one developer to less than a week, taking the hard work out of integrating with accountancy and financial software systems so that their customers can concentrate on developing their core product, for their customers.

What was the driving force behind your decision to launch Codat?

Businesses will no longer put up with outdated technology – we now expect the same high level of user experience and integrated services in the workplace that we get as consumers. For instance, our internal messaging tool, Slack, has lots of useful integrations, with calendars, email etc. that we use all the time. In terms of small business financial products, that was a trend that was really being missed and the main software tool a small business uses on a day to day basis is their accounting software.

We were working at an online lender, where we were building integrations with accounting software packages in-house, in order to create the best experiences for customers. The development was taking up an excessive amount of the business’ resource, and it occurred to us that many other businesses were working on exactly the same problem. We knew we could save all of those businesses a lot of money by taking away that technical pain and letting them generate real revenues with better distribution and higher customer satisfaction.

What do you believe are the key frustrations that businesses face with current business banking provision?

Frustration occurs when different products don’t play nicely together. What we’re working on with our clients in particular is to prevent the silos between different experiences. So many financial products operate in isolation, requiring businesses to spend a lot of manpower and time in manually collecting and sending data in order to fulfill simple business functions, like doing their reconciliations at the end of each week. We don’t think that banks look enough at the impact their decisions make on their customers in terms of workflow, and expect that the bank account is the central platform for businesses to manage their finances, when it’s really the accounting package.

Otherwise, the main issues with banks I think are pretty well known – lack of transparency about decision-making, no people to speak to about the important issues, and a sense of being delivered a retail consumer product with a slightly tweaked interface. To distil it, I think a closer focus on SMEs’ actual processes, not just their stated concerns, would be the main area where banks could do better.

How do you think the use of APIs and data sharing between platforms will transform the SME banking and digital finance space? 

Open Banking is obviously very topical at the moment and has been the catalyst for huge interest in data-led banking and finance products for SMEs. We feel the key here is the mechanism of consent by the SME to share their data. This control over data usage is in stark contrast to historic standardised credit reports or scraping of other publicly available data and opens up much higher granularity and quality of data to authorised third parties.

We believe that consented, contributed data, will become the central currency of SME information. As well as the richness in this data, in a world of GDPR, small businesses are ever more aware of, and demanding control over, the ways in which their data is used. For consumers, bank transaction descriptions alone carry much more meaning than they do for SMEs, which is why businesses use an accounting system and Codat has this data as the core of its proposition for banks and lenders.

The trend towards APIs and data-sharing means that some parties risk becoming a utility which could impact their bottom line. In workflow terms, it’s going to be those companies who provide the best UX who are going to win the battle for eyeballs. From our perspective, it’s definitely the accounting packages who are doing a great job of becoming wider financial dashboards, with healthy ecosystems of add-ons, who are winning currently.

In what ways will the way business customers access products and lines of credit going to change?

The best way to look at this problem is to ask where data sharing is being applied with real success currently. One example that we think is great is the Tide-Xero integration, which allows businesses to automatically reconcile Tide transactions in their Xero package. In the US, Fundbox and Kabbage have made the process of getting a small business loan much less painful with their accounting package integrations, which is an area a lot of banks tell us they are interested to get into. MarketInvoice and Growth Street in the UK are doing similar things, but applying them in the working capital finance space, which is where the administrative pain is possibly even greater.

The final step is to push information from other banking products into the accounting packages, so that SMEs can properly choose and manage loans, or direct debits, for example, without having to collect data from a number of providers, but just see the whole picture from one central dashboard.

Are accounting platforms ultimately going to be able to remain the primary financial tool for businesses?

We would go one step further and argue that accounting platforms are increasingly becoming the primary financial tool. This is particularly true for small businesses who are moving from handing over receipts and bank statements to accountants at the end of the year, to managing the day-to-day running their business in the cloud using software, such as Xero.

The core reason that accounting packages exist is to provide context around transactions. That’s not a business need that’s going to go away, and with the volume of data sources into accounting packages rising, banks will have to find ways to provide more brand value or to compete in terms of functionality for online banking services.

We believe the key to maintaining that position is owning the point of interaction between a business and their customers. On that basis you might even expect to see payment providers and CRM solutions competing with banks and accounting software providers in future.

Click here to check more of our Spotlight Series.
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