Automatic Bank Feeds 2017 Part 1: Opportunities & Pitfalls

A New Year, and it seems the world is getting more automated with each passing day. I’ve written extensively in the past about the opportunities and threats posed to accountancy by emergent technologies, but I would now like to focus on the current status of Automatic Bank Feeds in 2017.

Automatic reconciliation
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In previous articles I have explored what Automatic Bank Feeds means, i.e. a software-driven process that sets out to substantially automate the input of banking transactions into accounting software and the reconciliation with statements provided by the bank.  Different software providers use different technologies to achieve this, some with and some without the source banks’ knowledge or even permission.

I sometimes think of automatic bank feeds as the mythical siren singing from the rocks; attractive but potentially disastrous. While some providers of automatic bank feeds do so in partnership with the source banks and are therefore legitimate or ‘bank-authorised’, there are others that exist in a grey area contractually and possibly legally. These providers use ‘screen-scraping’ software to log in to banks’ online accounts and ‘scrape’ the transaction information from the pages to the process it into a useable data format to import into accounting software.

I have stated before that I think screen scraping as a method of capturing banking data is highly problematic when utilised without banks’ explicit consent or knowledge. My understanding is simply that it violates banks’ standard terms and conditions; a person who uses screen-scraping software has knowingly given their bank account details and login information to a third party. If any fraud were carried out on the account in question, the account holder is completely exposed and would very likely not be eligible for reimbursement.

Three years on from when Automatic Bank Feeds became prominent in accountancy, I remain concerned as to whether screen scraping is sufficiently robust and legitimate enough a process to pass muster and whether it actually does what it says on the tin. ‘Automatic’ is a misnomer; the accounts must still be checked for errors and if they’re not, it is possible that a key control, i.e. reconciliation, is not done and maybe further, no interrogation or intelligent analysis of the accounts. In Part 2 of this article, I will explore further how aspects of Automatic Bank Feeds can actually be beneficial and useful as a process, but I still advise caution to not take the word “automatic” too literally.

Some providers of Automatic Bank Feeds software have partnered with banks to offer an authorised service, thereby ensuring that the associated banks’ terms and conditions remain satisfied. I am both excited and encouraged that banks are beginning to open up their infrastructures to software providers with a view to developing solutions that will help both accountants and their client businesses. However, there are still issues and limitations with these authorised forms of Automatic Bank Feeds.

One of the main limiting factors for authorised methods of Automatic Bank Feeds is that they’re not universal; not all banks have consented to their use or have given the software the required access for it to work. This causes a problem for the accountant; yes, you can import a client’s accounts into your accounting software but only if that client’s bank account is with a particular bank. This inhibits the accountant from really developing new efficiencies; while some of their clients may be able to use Automatic Bank Feeds software, it is almost certain that many others won’t. Therefore, I would argue that the accountant is better off improving their existing processes across the board for all of their clients, and to cherry-pick new IT functionality to complement that process (I will explore this idea in depth in Part 2).

Secondly, some authorised Automatic Bank Feeds software products have been developed by businesses that are not big accounting software providers. Great you might think, and initially it is. However, the last year has seen some of these businesses being acquired by accounting software providers, which will invariably result in that software becoming available only through the acquirer’s accounting software. This in turn means that people who buy into such software could find themselves being shut out in due course if they don’t happen to already use the acquirer’s accounting software.

Given the existing limitations anyway of Automatic Bank Feeds software, these ‘garden walls’ that have been built up narrow the appeal even further. In short, authorised Automatic Bank Feeds is probably only going to be cost-effective if all your clients happen to use the same couple of banks and if they and you are all using the specific accounting software that happens to own the authorised Automatic Bank Feeds software in question.

Not terribly attractive as a proposition, is it?

However, it is not all doom and gloom. In Part 2 of this article I will explore how best accountants and their clients can use elements of modern technology and software to replicate the most appealing aspects of Automatic Bank Feeds.

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