Welcome to the fourth interview of Open Banking: Behind the Vault where we are joined by experts in the world of Fintech to take stock of Open Banking so far, and to engage in a bit of future-gazing. 

This time we speak with Kevin Sefton, co-founder and CEO at untied.

untied is an app powered by Open Banking that revolutionises personal tax return submissions. It tracks and learns from business spending, provides real-time income tax and National Insurance calculations, suggests tax savings, and enables filing and payment direct to HM Revenue & Customs (HMRC) from within the app. untied is the only end to end app recognised by HMRC for Making Tax Digital for Income Tax, which will affect six million self-employed people and property landlords by 2023.

Kevin joined us to chat about untied’s Open Banking solution for taxes, the perils of re-linking accounts, and his irresistible optimism about Open Banking take-up by small businesses in the UK.

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OPEN BANKING AT UNTIED

With a background as a chartered tax adviser, investor, and serial entrepreneur, Kevin has a history of launching fintech products, including an early internet payments business before they were “much of a thing”. 

When HMRC issued a call asking how Open Banking could be used to reduce friction for small businesses—by using real-time transaction data to calculate tax and collect payments—Kevin and his team were already on the mark, and ideally placed to respond, having already launched the untied app. 

“I'm a little bit embarrassed to say this, but I first wrote an article on using bank data to automate taxes over 20 years ago” he beams.

“We've been waiting for this moment, we've seen the opportunity, and we know what a hassle it is for people to be managing their taxes. We believe that there's plenty of opportunities for us to be helping them to automate tax, and Open Banking is obviously a big part of that.”

Back in January 2019, untied surged ahead of the competition when one of their users submitted the UK’s first income tax return using Open Banking data––all from their mobile phone.

MAKING TAX DIGITAL

Looking forward to April 2023, HMRC’s Making Tax Digital (MTD) will come into effect for sole traders, property landlords, and SMEs, totalling around 12 million people. These people will need to submit tax returns quarterly rather than yearly, and with new HMRC approved software that satisfies digital record keeping requirements. 

Kevin notes that anxiety about compliance is particularly high among self-employed people, which is likely to encourage their mass adoption of technology that takes care of things for them.

“People want to follow the rules, but they find them too complicated… They're really concerned about whether they get it right.”

This is where united can help–– untied become the first end-to-end app recognised by HMRC for MTD for Income Tax in December 2020––and where Kevin sees a big opportunity for Open Banking to gain significant uptake. 

Only around 3 million consumers and businesses are currently using Open Banking-enabled products in the UK, but, as Kevin notes, “the services that are really motoring using Open Banking are those that are accounting services.”

We can predict a significant acceleration of uptake if several million small business owners can be encouraged to sign up to automated tax filing services that are effortlessly compliant, and save them time and money.

OVERCOMING CAUTION WITH CONVENIENCE

So, what are the current barriers to uptake?

In short, it still concerns security. People are reluctant to hand over their businesses’ data, partly due to fear of the unknown, coupled with what Kevin describes as a “deeply rooted resistance to letting tax authorities into their financial affairs.” 

What HMRC can see is a very common question from users. But as Kevin notes, “tax authorities could only see what you give them permission to see which is basically the data that you submit. As things stand today that's your tax return.”

But unlike its consumer startup counterparts, who are reliant on personal bank account data to create a meaningful experience, there is already a precedent for linking small business account data to other third party software set by other widely adopted accounting solutions.

“People are very comfortable, and have been for many years, connecting their bank accounts to Xero, QuickBooks, Free Agent and various other services. And what that demonstrates is that once people are comfortable about what they're doing, and the reasons for it, then they will give more trust in whatever service is providing that.”

Kevin firmly believes that, in the end, reducing costs and hassle, especially under tighter scrutiny from HMRC, will win over any reticence.

“By being able to save customers time, they can actually see the benefit and it pays back quite quickly for them as well. So users are prepared to give you that trust in exchange for saving them the time and convenience that you're giving them.”

DON'T LEAVE ME THIS WAY

On top of providing real convenience and time-saving benefits, much like our previous experts have concluded, emphasising that people are in control of their data is key for adoption of Open Banking powered services.

For untied, who have been aggregating transaction data pre-PSD2 with partners that didn’t rely on Open Banking technology, the task of overcoming data-sharing hesitancy amongst users is nothing new.

 In some aspects, Kevin even believes the Open Banking regulation designed to overcome data sharing apprehension (in particular the 90-Day re-authentication of consent) is actually causing more anxiety for users.

“What we find in terms of the feedback that we get from users is sometimes they're not quite sure about the messages they're getting, particularly when it comes to renewing consent. And, in a bizarre way, something which is about giving users greater confidence in something actually sometimes causes greater anxiety and I think that it would be fascinating to see how this rolls out over the course of the next couple of years as Open Banking services increase adoption.”

From a product side, untied, like many other Open Banking startups, are grappling with data gaps when users don’t re-authenticate consent, or when users choose to do so again at a later date.

“We've got to manage all sorts of things around missed transactions, duplicates, and what that means really for the user, as well as for the data, and there are various things that we have to think about in order to build that in.”

While this presents an issue at present, Kevin is confident that it will be resolved with industry-wide collaboration.

“Ideally there needs to be a different way of access as an alternative to the renewal of consent, but I'm sure that it's the thing that we've all got in our interest to be improving and solving.”

In the interim, one of the main ways that untied are working to build trust and continuity is by creating a coherent end-to-end user journey under a single trustworthy brand, led by cheeky orb Taxberry.

Image: untied

“In many Open Banking journeys, you get referred through lots of different partners, and I think that that is something where we're working really closely to streamline. So, what people see is untied, untied, untied, untied, and they know that everything is within an untied experience when it comes to the Open Banking side.”

UNTIED FUTURES

For Open Banking powered products to become meaningful enough for users to re-authenticate consent, it’s key to identify other services that are so valuable to the end-user that it’s a no-brainer for them to grant permission to their data on a regular basis.

 For untied, this means working with partners at tomato pay (previously Fractal Labs) to build out services like quoting and invoicing into their offering.

“Our joint initiative allows a sole trader to create an invoice, a quote, an invoice request payment, and for that to be tagged and allocated, and tax paid automatically when the money comes in. And the collection of that money, of course, is powered by Open Banking.”

 This is all part of untied and tomato pay’s joint initiative known as SMART (SMEs Manage Accounts Receivables and Tax)––backed by the Banking Competition Remedies Capability and Innovation Fund––and which powered the UK’s first open banking payment to HMRC in January 2021.

Beyond taxtech, Kevin believes that for Open Banking to be truly useful, we need to think less about data aggregation and more about providing value in the interpretation of that data.

After all, the data has been present for a long time.

 “Open Banking is a huge enabler for the whole financial services community, and it's about how we actually use that enablement. In and of itself Open Banking is just something that brings in data. Well, so what? It's like the bank statements which have been piling up on people's desks for years. Are they useful? Well no, they are regulatory or statutory requirements, whatever it might be depending on the paperwork that's coming in. But if Open Banking data is used for something which is really powerful and personal to the individual, it's a massive, massive opportunity.”

Enjoyed this and want to talk to us more about how Open Banking could be a benefit for your company - please feel free to get in touch.