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Easy Money

Thanks to game-changing regulation change, far better UX, and clever algorithms that turn “should-we-lend?” uncertainty into risk you can put a price on, it will be easier to access capital, accept payments, and calculate cash flow and taxes. Money will become, if not easy, at least far easier to get hold of and manage.

James Wallman, Future Gazers report for Yell Business

Thanks to the UK government’s Open Regulation, which comes into place in 2018, and the European Union’s PSD2 — meaning payment services directive, and it’s the second one — banking is about to go through a revolution. The result will mean that in the future, you won’t need to manage your money via the few big banks anymore. The rise of agile, responsive fintech firms will mean easier, more user-friendly banking. Instead of spending hours filling out forms, these new userfriendly systems will gather huge amounts of data and apply machine learning (ML) algorithms to evaluate loan applications in milliseconds.

The ML platform that personal loan firm Avant uses, for instance, considers 10,000 variables and learns how to predict default rates20. In China, startup WeCash mines public mobile data from about 600m mobile internet users to assess a single customer’s credit risk.

It will be much quicker to access the funds too. If you apply for a loan from US-based lender Ondeck you can ask to borrow up to $500,000; there’s no paperwork, and you can have the money within 24 hours1. 24 hours not fast enough? Another US lender, Kabbage, provides up to $150,000 almost immediately after filling out a simple application. All an applicant needs is a business checking account or a PayPal account.

Payments will be far simpler as customers move from physical to digital money — including crypto-currencies like BitCoin22 — and payment systems are automated and, often, based on the Internet of things. Now that devices can speak to each other, they are automatically making payments too. You can pay for your Lyft taxi service via Amazon’s Alexa. You can buy your groceries directly from Samsung’s Family Hub fridge.

As well as easier access to money, in the future it’ll be far simpler to manage cash flow and calculate revenue, cost of goods sold, expenses, taxes and profits — as AI systems instantly track and report on all our firm’s primary financial data. There are already firms working to make that a reality.

Edinburgh-based Float, for instance, is an online budgeting and forecasting tool that connects to accounting software like Xero and FreeAgent to help small businesses get clearer views of their cash flow. Founded in 2011, more than 400 businesses are now signing up each month.

New small business-focused, Estonia-based, fintech firm Holvi offers the key financial functionality that most small businesses need, including invoicing and bookkeeping. “You’ll never have to spend time syncing information between different systems as it’s all in one place,” the Holvi website claims. “Store money safely, send invoices with just few clicks, start online sales, save and record receipts with a single tap.”

Berlin-based SMACC also makes it simple for small and medium-sized enterprises to automate their accounting and financial processes. With receipts, for instance, all you do is upload yours to SMACC and you’re done. The system turns them into a machine-readable format, encrypts them and allocates them to the right account. And with invoices, the SMACC system checks against some 64 data points and verifies the invoice, checking, for example, that the maths adds up, and even ensuring that the VAT ID and its issuer are correct. At first you have to show SMACC the ropes, but the idea is that it learns and gets ever better at automatically dealing with your financial data.

Today, managing the financial side of a small business causes millions of people serious headaches. After all, who goes into business to handle admin and accounting? Whether you’re a hairdresser, a plumber or an engineer with a degree in computer science founding a startup, the chances are you don’t want to spend a significant amount of your time calculating cash flow and whether the top and bottom lines are growing as you said in your business plan. And yet, one in five new business owners spend more than eight hours a week managing their banking; four in ten (42%) say dealing with finances is the most stressful aspect of running a company and 17% say the stress has made them unwell23.

No wonder all that admin puts people off running their business: 53% of business owners say financial worries are a source of stress and a drain on their motivation, and 35% of company owners say that, at least once a year, stress causes them to completely lose motivation to continue running their business24.

But don’t fret: we bring good news. By the late 2020s, these headaches will be gone for most small firms. They’ll be using the services like Float, and Londonbased mobile-first banking service, Tide.

“It’s often far too late that businesses realise they are going to run out of cash, or there is a constant anxiety about it as they are without a detailed cashflow report,” says Float’s founder and CEO Colin Hewitt. “We help business owners sleep better at night.”

Tide, which only launched in January 2017, is already helping many business owners sleep better at night. “We’re now opening around 7% of all new business current accounts in the UK,” says Kiki Loizou, who left her role as Sunday Times small business editor to become Tide’s head of communications. “Our plan is to serve 50m small businesses globally by 2026.”

Deregulation will open the door. Then the robots — that is, automation from AI and ML delivered — will rise up and change the finance function of business from a bore to a breeze. By the late 2020s, small business owners in the UK will be sleeping better at night. They’ll be more able to focus on what they do best, the business they started the business for. They’ll be an enjoying an era of much easier money.

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1. Ondeck is in the US, Canada and Australia. It is here to illustrate how simple and quick it will be in the future to access funds.
2. BitCoin is now being accepted by luxury goods firms. See, for instance, Clive Martin, How Bitcoin is making waves in the luxury market,, 28 August 2017. And if you follow the Diffusion of Innovations, what begins in the luxury sector tends to trickle down into all sectors. ABS braking, for instance, began in Formula One cars, then appeared in luxury models, and then became standard.
3. Source: report for business innovation charity Nesta and backed by the Competition and Markets Authority.
4. Source: research by chartered accountants Haines Watts.