Xero is moving in a lot of directions at once which makes it hard to work out which issues are most important. The two biggest in my book are the ramping up of data-based services and the integration with the banking framework.
I asked Xero CEO Rod Drury at Xerocon what was behind the thinking for the assurance dashboard. The new display is intended to divide information in a Xero file between electronically entered data (such as through bank feeds) and manually entered data.
The implication is that manually entered data needs to be reviewed more carefully for errors or malpractice.
Although the assurance dashboard was framed during Drury’s Xerocon as a step towards cheaper auditing, it is more of a spin-off from a broader goal. The real motivation is to improve the quality and transparency of data in a Xero file so that financial services companies have more faith in its integrity. They can then calculate premiums or interest rates for insurance and loans accordingly.
In the video below Drury explains the bigger picture that data plays in creating Xero’s “financial web” – a network of interconnecting financial services, data sources and machine-to-machine communications. This financial web will power a broad range of services for Xero users that they will access through their accounting program or Xero’s marketplace.
The second theme is banking integration. This is another bold move that will blur the line between accounting program and online banking. A senior executive from NAB Bank took the stage at Xerocon to talk briefly about updating the bank’s core systems so they can talk to Xero’s database.
In the video below Drury talks about what financial services will arise from opening up a deeper level of communication with a Big Four bank. Three services will augment the existing processes in Xero.
The first will be the rather dull automatic provisioning of bank feeds from within NAB’s online banking portal. This is great for Xero and NAB users but ANZ already does this.
The second is the elimination of ABA files. These files are used to pay multiple accounts payable invoices in online banking by downloading a batch payment in Xero.
Post-integration an accountant or bookkeeper will select the invoices they want to pay in a batch and Xero will notify the bank of the total to be paid. The bank will then notify the business owner on their mobile device through the bank’s mobile app. Drury suggested this workflow and it sounds like it will still be a good six to 12 months before we see this in action.
The third service is an update to Xero’s online invoicing. When a Xero business emails an invoice to a customer, the email also contains a link to a web page displaying the invoice. The customer can pay the invoice immediately with a credit card using a third-party payments provider such as PayPal or eWay or other.
The update will include the option to pay by direct debit. This cuts out the fee paid to the credit card company and the payment provider. This will only be available in Australia, most likely moving to New Zealand too. The US is off the table because its deregulated banking sector hasn’t built the direct debit payment network required to make it work.
Aside from those three updates there’s the big one – integration of financial services to within Xero itself. The most talked-about scenario is a button inside a forecasting screen that connects to a short-term lender.
If the forecast shows that cashflow will fall into the red just before payday, the Xero user could press the button to request a stop-gap loan. The user would approve Xero to share the necessary details with the lender, which would then calculate the interest rate and send through an offer.
This is still a while off from the sound of things, but some variation is likely to appear next year. Xero has already taken the first step with the launch of a financial services category in its marketplace just after Xerocon.
Drury discusses how this will work and what it will look like in the video below.