In February the state cabinet of India’s Mumbai Metropolitan Region approved a policy that aims to make the Indian city one of the world’s great financial technology (Fintech) hubs. The policy hopes to support the creation of 300 Fintech start-ups, through a venture capital fund, subsidised co-working space and other inducements.
The ambition is easy to understand. Fintech is bringing major investment and significant numbers of highly skilled jobs to established hubs like London, Toronto, Stockholm and Tokyo. The value of global investment in Fintech start-ups is projected to grow to USD 8 billion in 2018, up from USD 3 billion in 2013. Mumbai aims to be a top five Fintech hub within five years.
Sunil Hansraj, joint managing partner at UHY member firm Chandabhoy & Jassoobhoy in Mumbai, says: “At a recent demo day in Mumbai the 11 start-ups that took to the stage showcased original technologies in financial services, with propositions ranging from blockchain-based identity solutions to AI-driven investment management solutions. These companies are becoming increasingly popular in India and fast providing an option for the use of financial services. Given the thrust given to start-ups in India and the encouragement of ‘Digital India’, I do believe these are here to stay.”
A DIGITAL REVOLUTION
The excitement about Fintech is justified. Financial technology, developed by a new breed of tech-savvy entrepreneurs, is changing the face of financial services in all sorts of ways, from mobile payments to online bookkeeping. It takes in wealth management apps, private online banks, direct lending platforms, blockchain networks and online credit scoring systems. A digital wallet can now connect all a person’s financial services into a single go-to place online, while another app creates personalised financial plans in minutes. There are few areas of financial services that are not at risk from Fintech disruption.
Traditional firms are aware of the threat. A 2016 report found that a large majority (83%) of leaders in financial services firms believed part of their business was at risk of being lost to Fintech companies. Last year, Bank of England Governor Mark Carney warned that new financial technology could damage the business model of traditional banks.
Accountancy, too, is being fundamentally changed by new digital technologies. Software applications like Xero and FreeAgent are giving small and medium-sized businesses access to secure and comprehensive accountancy and bookkeeping software that runs in the cloud. Add-ons like Receipt Bank allow businesses to submit expense claims and receipts from their smartphones. There are many more.
COULD JOBS BE LOST?
It is no surprise, then, that a younger generation of accountants believes many traditional low-level accountancy skills will disappear resulting in a skills shift for new accountants. Global research by ACCA (the Association of Chartered Certified Accountants) found that three out of five accountants under the age of 36 believe technology will replace many entry-level jobs in the profession. The report states: “With increasing attention on the application of ‘robotic’ software across the profession, this is a generation who broadly expect to see more automation taking place.”
Martin Cairns, managing partner at UHY McGovern Hurley LLP in Toronto, Canada, believes the automation process is already well under way. He says: “Manual bookkeeping is almost a thing of the past. Cheque writing is becoming less and less common. As technology continues to advance and businesses adopt the new integrated technology, accountancy firms that have relied on bookkeeping and accounting reconciliation work will struggle.”
In Russia, too, Fintech is replacing certain traditional accountancy tasks, says Nikolay Litvinov, director of audit and consulting at UHY Yans-Audit LLC in Moscow.
“The development of financial technologies will certainly change the approach to the accounting profession,” he says. “Already, on the authority of leading Russian banks, automated accounting systems for small businesses are being created, effectively replacing the entire work of the accountant.”
Alexander Koinov, managing partner at member firm UHY Prostor Ltd in Kiev, Ukraine, agrees. “Our company provides accounting and auditing services. Some sources suggest that 94% of this work will be automated by 2024. In my opinion, that looks likely for the Ukraine too.”
THREAT AND OPPORTUNITY
Fintech is certainly a disruptor. It will allow even small companies to do for themselves what they previously relied on accountants to do. The automation of traditional accountancy tasks has gathered unstoppable momentum.
But the younger accountants surveyed by the ACCA do not regard the encroachment of new digital technology with undue pessimism. While they believe Fintech is a threat to entry-level jobs, the report states that they also “recognise that technology will enable finance professionals to focus on much higher value-added activity.”
In this interpretation, technology is a liberator, freeing up valuable time. And UHY member firms are already using Fintech applications to streamline processes, creating the space for higher-level tasks.
“Our company uses technologies like cloud data storage and distributed access for the viewing and editing of the accounting data of our clients,” says Nikolay Litvinov. “We also actively use the digital signature. All financial and tax reporting is submitted by us to the tax authorities via electronic communication channels.”
ADAPT TO SURVIVE
Accountants have to learn to use the new technology in their everyday work. They may also have to broaden the skills and services they offer to clients. In Kiev, Alexander Koinov is unequivocal: accountants and auditors who fail to prepare for the Fintech revolution may not survive. “We will not be able to stay as we are today,” he says. “Now is the right time to talk about what we must do to adapt.”
The first requirement is to acquire the IT skills the profession will increasingly need to make the most of new technologies, and to be able to advise clients on the best Fintech solutions for their own businesses. Firms with an obvious Fintech expertise are likely to retain the trust of clients. Nevertheless, acquiring that in-depth knowledge will take time and investment.
“The development of new technologies opens a window of opportunity for new business,” says Nikolay Litvinov. “However, in this case, the technologies require a significant amount of investment and deep competencies in the IT field. We are working on options for cooperation with our partners in this area.”
Martin Cairns says that firms who make that investment of time and money may reap significant rewards: “They will be better positioned to advise existing and prospective clients on ways to streamline their internal bookkeeping and accounting functions, which will allow more time to concentrate on what clients really want – business and tax advice.”
Firms that embrace Fintech will free up time for the advisory function, and they may also be able to offer better, data-driven advice. For example, IT-literate accountants can take advantage of the real-time information offered by cloud-based financial applications to offer more in-depth guidance around access to finance, growth and cashflow forecasting. They can delve deeper into the data, producing real insight. And by doing so, they can make themselves invaluable, putting their expertise at the centre of client businesses.
But is that enough? Is it possible that even the advisory function might be automated, with human accountants replaced by the next generation of data-driven artificial intelligence (AI)? Could applications that learn as they work replace the need for accountants and financial advisors altogether? Most think it unlikely.
“I think there is and always will be a huge opportunity for specialist advisors,” says Selwyn Cohen, managing partner at UHY member firm Cohen Fasciani in Melbourne, Australia. “Every client has a different issue and we develop unique solutions. Above all, we know how to communicate those solutions to them. I fail to see how that relationship, with its unique insight and tailored advice, can be replaced with AI.”
Sunil Hansraj also believes that, while technology may help human advisors give better guidance, for the foreseeable future the depth of experience and expertise that accountants bring to crucial business decisions is irreplaceable.
Decisions need a lot of investment – of time, effort, resources and, importantly, emotion – for which an app or machine will not be able to add the same value.
So, we can breathe a sigh of relief. Accountancy is safe, even if the skills accountants need are changing. The accountants of the near future will use technology to both automate basic processes and add value and insight to their role as analysts, consultants and advisors. The most adaptable will be IT-literate, tech-savvy, and – perhaps more than ever – central to the operations of the clients they serve.