Fintech
Integrated finance is still in vogue as accounting automation startup Ember partners with HSBC UK
A few years ago, you couldn’t attend a fintech meeting without ending up in a conversation about integrated finance. In 2020 we even wrote that integrated finance could represent a solution the future of fintech.
The distribution strategy allows fintech companies to integrate their services into other products and services, which in turn gives users access to new features without having to sign up for a new service. It has proven to be a particularly attractive approach for fintechs as it gives them a new level of products to offer to larger banks and financial services providers.
Brace, a British startup working on an embedded tax offering, is proving that the strategy is still valid in 2024. The small company has partnered with HSBC in the UK so that the bank’s corporate customers can access Ember’s services from their online accounts. Ember could potentially acquire thousands of customers with a single partnership.
Ember’s service retrieves companies’ recent banking transactions and automatically classifies them. Next, customers can track expenses, add receipts, create invoices, and perform basic accounting.
Ember then provides an overview of your company’s income and expenses, estimates how much you’ll pay in taxes, and tells you how much money is available to withdraw as dividends for the owners.
Image credits: Brace
Larger companies will likely work directly with accountants or even hire in-house accountants. But freelancers and small businesses with fewer than 10 employees could at least streamline their accounting processes with Ember’s self-service product.
“Products like Xero, QuickBooks and FreeAgent are all designed for accountants and not end business owners. And we saw a huge opportunity to create a transformative experience for an end-entrepreneur to take care of their entire set of tax obligations,” Ember co-founder and COO Daniel Hogan told TechCrunch.
However, the problem is that this market is extremely fragmented. There are hundreds of thousands of small businesses in the UK alone, which means it’s difficult to get customers.
“We were going up against the likes of Xero and QuickBooks on ad spend, and it was difficult to acquire customers directly for that very reason – it was expensive,” Hogan said.
That’s why Ember has started negotiating with big banks like HSBC UK to offer a built-in solution. If customers want to log in more featuressuch as calculating VAT returns from the platform, they can pay Ember to do so.
Ember also has a team of in-house accountants who can take care of complex tasks for paying clients, such as annual year-end accounting and corporate tax management. The free version of Ember that you get on HSBC’s online banking portal serves as the top of the funnel for starting to acquire paying customers.
From now on Ember will not work exclusively with HSBC. Contracts with big banks take a long time to negotiate, but hopefully the company will have another partner bank to announce soon.
With the upcoming regulatory changes in the UK (“making taxation digital”), accounting software is likely to receive increased interest from small businesses. By 2026, approximately 1.75 million business owners in the country will need to change how they file taxes. The vast majority of them do not use any accounting services to help them in this process.
“[HM Revenue and Customs] essentially made the decision to be an API-first organization. So instead of building it themselves, they rely on software vendors, like us, to actually build that whole experience. They are just the API level,” Hogan said.
“They rely on us to create better user experiences and help customers report more frequently and accurately.”
In addition to this initial partnership with HSBC, the regulatory opportunity is also part of the reason why Ember recently raised a £5 million ($6.3 million at today’s exchange rate) funding round from Valar Ventures, Purple Fintech and Shapers.