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Should contractors be wary of bank feeds?

The whole world is moving towards realtime data – the whole world except, of course, the banks. These financial behemoths still rely on infrastructure and software designed in the 1960s and 1970s, which will fall down spectacularly with just the slightest of prods. NatWest’s systems crashed spectacularly last year and it took them several days to bring them back.

So while the agile young businesses of today are enjoying their news, website analytics and communication in realtime, they have to wait hours or even days for financial and transactional information to be processed. Not only that, but this information is kept under lock and key within two-factor-authenticated online banking systems, with no bank-sanctioned way to retrieve it.

To meet the growing demand for this information, several intermediaries have popped up which promise to pull your bank data out of your account and dump it into your accounting software of choice. There’s a catch though – you have to hand over your login credentials.

This is at best a security worry, and at worst could end up costing you a lot of money. Most online banking terms and conditions contain clauses that nullify your indemnity cover should you give a third party access to your account – so by using these services many freelancers and contractors are unwittingly putting their finances at risk should their account be compromised.

Secure services are starting to pop up – we’ve launched a few feeds using a secure retrieval method – but there is still a long way to go.

If there’s one thing we’ve learned about banks in recent years – be it the LIBOR rate fixing scandal or PPI mis selling – it’s that they don’t take action unless there is overwhelming demand. For freelancers, contractors and small businesses to get access to real-time financial data (their own data, lest we forget), it’s going to take a lot of nagging, strongly worded letters and lobbying.

Accounting software providers have already begun to pressure banks for these features, but contractors can do their part too. There may be a long way to go, but together we can drag the banks – most likely kicking and screaming – into the 21st century.

Jon Norris is a freelance writer and Web Editor for online accountancy firm Crunch

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