AI-Powered Fraud and Slow Burn ESG - The latest in Fintech, AI, and Accounting Tech

[00:00:00] It's not a green wash, it's actually something that shows legitimacy in terms of something that has moved forward. I believe this is probably rationally rather than proactive, but I think this is really positive, especially for those that have been bundling their software into their normal service pricing. FreeAgent have launched something fairly new into their product and it's all in anticipation of the whole NTD for income tax rollout. You can now split the ownership of property on a property-by-property basis.

[00:00:25] The average AP fraudulent payment was half a million pounds, which is massive. So one slip on a Friday afternoon and you're out of pocket half a million because someone's got a bit clever with AI or a very well-crafted and well-timed email. If the payments were made, we're just kind of screwed. You don't need it till you need it, but you definitely need it. They did announce this, it's not unknown in the market. I think they sort of said fairly recently, maybe the last couple of months, that that was going to be one of their options that they're going to pursue.

[00:00:51] Welcome to this week's Digitals in a Cruel World episode. We are delighted to say that the series sponsor this week is also one of the most popular apps in 2024, which is Approval Mac. I'm really looking forward to hearing a little bit more from them on this week's episode and we're going to bring you the latest in accounting tech news. Before we go any further, I'm going to check in with our co-hosts and let's go to the least controversial author too, shall we? Hi, how are you, Ryan?

[00:01:17] Yeah, I'm the least. I'm good, thank you. I am buzzing since the launch of the new business. Been really busy, but it's been going well. So yeah, I'm exhausted as well. But yeah, all things positive at the moment. When you get home, do you get like a fanfare or welcome, like a certain theme tune that happens, you know, like Avengers Assemble sort of vibe? Hey, apart from the fact I work from home, so I don't really arrive home now. Yes. From room to room, do you have like a theme tune?

[00:01:46] As I go in and out to study, I've attached, like it's got a new bit of electrical equipment and just siren goes off every time I'm in and out. Oh, wow. That's quite cool. Like gives you the pump, right? You know what you need, Ryan? Scares the dog. I think, you know, you know what you need is every single time you win some new business, you need to be have a ritual. So you've got like a, I don't know, like people have like a bell ring or something. You've got to have something that's like your klaxon sounding. Like the Wolf of Wall Street.

[00:02:12] I don't even want to ask you how you are, John, most of the time, but how are you? I'm really good indeed. Thank you for asking. I'm, yeah, I feel like I'm very much in the zone work-wise and stuff. So it's all good. And I'm appreciating watching Ryan succeed from afar. So it's really, really exciting. Oh, wow. That's actually really nice of you to say. And now that, that bit, that little audio clip is what I'm going to use to celebrate every win.

[00:02:41] You can have it as like your notification. Every time I give you a thumbs up on the WhatsApp message, when you've asked, when you've asked a question, which requires a actual response and I just give you a thumbs up, you can have that as your notification. Yeah, I just, and so, such lovely bromance. Thank you. That's, I appreciate that. I'm very grateful for it. I'll put it in my diary later. And I'm kicking off. So Free Agent have launched something fairly new into their product.

[00:03:09] And it's all in anticipation of the whole MTD for Income Tax rollout. And you can now split the ownership of property on a property by property basis in the Free Agent app when you've got the landlord license. So this is a neat little update, very much needed because as we all know, as we're prepping for MTD for Income Tax, you do need to get these ownership structures correct in your system of record so that you can make sure that the profit splits, and the income and cost splits are accurately recorded.

[00:03:36] And this is really bringing Free Agent up to parity, I guess, with some new products in the market. So nice little update, very much needed. And I'm sure it'll be nice and easy to implement for anyone that's thinking of using Free Agent for their product of choice for MTD. Yeah, I like that one. I've got something from GoCardless, who I guess we've not had really much news from them for a while, but they have partnered with Form3, a cloud-native A2A platform, can't even say that one, to provide Bax payment connectivity.

[00:04:04] So, you know, GoCardless focused on direct debit for so long, they're moving now into the backspace through this Form3 partnership. Now, I guess the main thing with Bax is it's one of the main payment platforms in the UK, and the fees are relatively cost-effective at anything from 5p to 50p per transaction. And I guess this just broadens the usage, the applicability of GoCardless. It means that there'll be more businesses that will want to utilize this tech, especially if they're digitizing their platform.

[00:04:34] Because Bax payments generally tend to be more of a manual process. You've got some providers to do it, but they're not integrated into many operational or financial systems. So with GoCardless bringing this in, I think this will broaden their appeal to a lot of more traditional businesses and players in the market. Yeah, I think it's an interesting move from GoCardless, isn't it? But yeah, let's see where they go with that. I have another update from LinkMyBooks as well, because they have officially joined the Visma family.

[00:05:04] Very exciting times. But Dan Little from LinkMyBooks, who is the co-founder and CEO, announced this the other week. And yeah, exciting times for them as they join what is probably the biggest software company in Europe, I think. Certainly in our space, that's for sure. And yeah, Visma obviously on the acquisition trail at the moment, making lots of noise in terms of picking up small things here and there across the UK and Europe at the moment. And yeah, so it's going to be interesting to see what Visma do with LinkMyBooks,

[00:05:32] how they sort of fit this in within the wider portfolio of businesses. And you can imagine that they might want to plug this into some of their other software and utilize that for drawing in the sales transactions from the multi-platform business types that you can get in there. And I guess also maybe enhancing what you can do in terms of reporting and stuff. So it's going to be a fascinating time to see how LinkMyBooks goes over the next few months. And I guess that's in the context as well of Visma potentially going on to the stock exchange in the Netherlands next year.

[00:06:01] So I think that's the plan for them. So just adds more value to their valuation going forward, I guess. You just beat me to it. I was about to say, can we have like a little speculation in terms of where they're going, Visma, given the number of acquisitions that they've made? But you pretty much called it just there, John, haven't you? Yeah, well, I mean, I think they did announce this. It's not unknown in the market. I think they sort of said fairly recently, maybe the last couple of months, that that was going to be one of their options that they were going to pursue.

[00:06:30] And obviously, if you are exploring this, it kind of tends to be made public knowledge anyway because you've got to kind of go warm up the markets and warm up your investors to get involved with any public issues. So, yeah, I mean, Visma, like I say, massive, massive organization. I think a natural way for them to go. So I think the one caveat I'd have on that is like, you know, would moving away from the private equity model have an impact for them in terms of being able to continue to fund acquisitions?

[00:06:57] Because I've seen other businesses go on to a stock exchange and then find that, you know, the access to capitals can sometimes become, you know, a little bit more challenging just because of the way that a market reacts to things. Having said that, though, you know, I think, and I haven't seen recently, but I understand that Visma are fairly cash rich. You know, they've got a lot of, obviously, a lot of SaaS businesses in there. So they've got a lot of ongoing revenue that comes in from a cash basis. So they've probably got a reasonable war chest. And I imagine part of the float would be used, you know, apart from exiting the PE,

[00:07:26] would be used to sort of build up a war chest and make further investments and enhancements to what they've got. Very good. Very good. So we've got some other news from Ignition this week, which is the revenue operations platform for service-based industries. Service-based businesses, sorry, has introduced auto pricing, a suite of industry-first pricing automation tools designed to help businesses streamline price increases at scale.

[00:07:52] The new feature allows businesses to automatically increase prices across multiple clients when renewing proposals, ensuring a boost in revenue and profitability without the hassle of awkward client conversations. Greg Strickland, who we announced was the Ignition's new CEO, says that many businesses hesitate to raise prices due to the kind of processes of trying to do so and also the controversy that comes with it. Auto pricing at least removes the barriers and allows the businesses to kind of do that at

[00:08:21] scale and shift the focus from cost-cutting to strategic growth. The bulk price update feature allows businesses to apply a percentage price increase across client agreements. So making price adjustments faster and more consistent. So the customers that have tried it have already seen some impressive results. And the feature is part of Ignition's commitment to empower businesses with tools to automate

[00:08:47] and optimize pricing so that they can ensure they charge for what they're worth and enhance long-term profitability. Great initiative by the new CEO and also the new, I guess, the new management team in general. And what do we think about this, guys? I think this is really positive, especially for those that have been bundling their software into their normal service pricing. And I think this may be a reaction to what Socket released because I know they made a big thing about bulk update of pricing.

[00:09:16] I think 2024 back end. So, yeah, I believe this is probably reactionary rather than proactive to maintain clients rather than losing to a potential competitor. But definitely positive. Something that should probably have been there for a longer period of time. It's a huge impact following the likes of the software price increases last year where lots of accountants were up in arms because they had to manually change all their pricing. Now, if this feature was there, it would have been a lot easier for them.

[00:09:41] So, I've got something from Modular for Hot On Hills, I guess, of their acquisition of Nook. They have now integrated with Nomi, N-O-M-I. Nomi? Nomi. Nomi. Nomi. Whichever one. Nomi. For smooth payroll payments. So, Modular is a tool that's used quite heavily for payroll payments. They're integrating lots of payroll systems. But Nomi is not a system that I'm massively familiar with. Nomisma. Oh, they've just rebranded. There you go.

[00:10:11] That's the way I've missed. Nomi is the rebranded version of Nomisma. So, it works for a subset of accountants that are already on the Nomisma software, the franchised accountants that use the software. God, I completely missed that. Did we cover that? Well, Nomi has done a lot of different integrations in the past. I think we did cover the rebranding, but we didn't know if it meant there was anything that was like a big shift. I know they had a lot of shifts in terms of their CEO management structure.

[00:10:36] There was a few big people that had left there that were instrumental parts of that growth. So, I think Ashley Hall was one of them. He went across to Yohan Gori's business. But, yeah, I don't know much about how Nomi are actually doing. They did a lot of different payment app rollouts and whatnot. But I guess we don't know enough about it. It's an interesting choice of integration because it suggests that there's something

[00:11:03] more there that perhaps most of us haven't really understood enough about Nomi's growth in the past year, for sure. But it's one to take another look at, I guess. Definitely. I've got one final thing as well, which I don't know if I decal a little bit over this. I want to know how long it takes for a tree, if it's planted, to also start making returns

[00:11:32] on its investment, which is awful to say. But Ecology, the UK-based climate solutions platform, has acquired Net Zero now, a carbon measurement and reduction provider, aiming to offer businesses a complete solution for achieving Net Zero. So it's a strategic acquisition that combines Ecology's experience in funding climate projects like reforestation and carbon removal with Net Zero now sector-specific carbon measurement tools.

[00:11:58] So the partnership helps businesses streamline their carbon reporting, enhance supply chain transparency and meet regulatory requirements such as SECR, CSRD and SBTI, more of which, you know, I'm sure that there's some more acronyms in there that I can fill you with later. But let's just say that, you know, there's some regulatory requirements that they need to fulfill. And then for sectors like accounting, Ecology's tools will allow businesses to create custom

[00:12:26] climate impact reports, measure scope one, two and three emissions and engage with stakeholders with embeddable dashboards. So I think this is important as a demand for sort of climate accountability will continue to grow over the next 10 years. Ecology's acquisition makes it quite a good player in helping businesses lead the industries towards Net Zero with the tools and while also staying compliant with the complex regulations in the space.

[00:12:55] Great news for them, great news for all of us, hopefully, and shows a real commitment towards what we need to all get ourselves on track for. I think Ecology started, what, in 2019? And then I was just doing a little GPT to check how long it takes for the amount of trees that they planted to really stop providing us with enough CO2 sequestration. And it says that it's between 10 to 20 years is the optimal.

[00:13:20] So actually, we're maybe another four years off their efforts in terms of how many trees they have planted, which I think is something like into the like 90 odd million trees. And let's say so I think this is like a fantastic kind of wing in this industry. It's not a greenwash. It's actually something that shows legitimacy in terms of something that has moved forward. I think this is really interesting from Ecology because unlike a lot of do-the-wraps in this

[00:13:48] space, they're not plugging into mainstream accounting products. They've got a connection into Shopify and you can plug it into Zapier as well. So you can obviously then plug into a whole ecosystem of other things. But I quite like the way that they've run with this in terms of allowing you just to sort of say, right, if you sell something on Shopify, for example, we'll plant a tree for every sale or something like that and try and have an impact on offsetting your emissions. So, yeah, fascinating to see this. And I think this is in the context as well.

[00:14:16] I mean, which came out, I've got to call this on Friday, is that Sage Earth, which was an acquisition that Sage previously made of another product that's out there, free product available to plug into lots of different systems to try and measure a small business's carbon impact. That is no longer going to be available for free. And Sage are relaunching it as a carbon accounting solution. And there's a wait list now for that. That'll be a paid for product.

[00:14:42] But we're going to see tons of this because ESG reporting requirements are coming on stream this year and into next year with the carbon reporting, ESG reporting requirements that we have. And of course, for any business that's part of a supply chain, whether that's based in the UK or Europe or a few other countries as well, is that you're going to be starting to be asked to provide particularly carbon reporting, but also more broadly, a wider set of ESG reporting requirements. And the challenge is for a lot of businesses quite often is getting hold of this data because it's quite often unstructured.

[00:15:11] Even getting hold of your emissions data is a challenge because it's buried often in energy invoices or in mileage claims for employees. And yeah, anything that Ecology and other people can do to facilitate making that process easier to capture that data and to get it as accurate as possible is all for the good as far as I'm concerned. Because like I say, it's a real challenge for businesses to capture this information effectively. And I guess, sorry to slightly correct you on time, John, but Ecology did release Ecology

[00:15:39] Zero, spelled with Z, where you can connect it to zero and pull down your financial data. I think it is only zero that they connect into, although you can import other financial data in, but just working out your scope one, two, and three. But I know their focus is not on that. And that was more of an ancillary product. Yeah. I think this is the issue, right? Is that getting hold of this. I mean, I think this is a classic example of where you could probably use, you know,

[00:16:06] ChatGPT or one of the other LLMs to help with this because you can, you know, if you can connect that into your account system and then say, can you go back through my energy invoices and re-extract all of the usage information? Or can you go through maybe the mileage claims from my employees? And if we've got the data, say in a HR system, pick that up and correlate it with the vehicles that they drive and then try and estimate the impact. I think this is, this is a real demonstrable impact of where you could use an LLM to really sort of enhance what you do and make this, make this really easy.

[00:16:40] We're lucky enough to be joined by Matt Lowry from Pro Max today, which we're going to dive into threats regarding fraud and how tech companies are kind of trying to help us accountants stay ahead of those evolving threats. So I think Matt, just the first question to ask you is, well, how is or how has fraud been evolving, especially with the whole, you know, boom in AI recently? Yeah, I think it's just a proliferation of it in terms of the sheer volume of fraud attempts, whether that's kind of phishing or phone calls, which I let you had one this

[00:17:08] morning personally, which is funny timing given the recording of this office. It's just a sophistication of it. It's like you say, the rise of AI means that you can kind of have the CEO of a company essentially on a zoom call, the kind of deep fake voice and someone can, can this fire payment to that, to that person. So people need to be obviously ready to combat those sorts of, of attempts. Yeah, definitely. Because the email style fraud attempts, I guess, has evolved through large language models.

[00:17:37] You get a lot fewer of those ones where it's just terrible grammar. You know, it's now much, much more well-written, but also the phone calls that they're, they don't sound robotic. Now they sound like someone that's like having a proper conversation with you. And even though there's, you know, it is essentially a robot on the other end. Yeah, it's actually, and I think it's just the more that is out there, the more that these kind of malicious actors, I guess, are learning, right? And they're improving how they're trying to do that, which means that everyone needs to stay a bit more vigilant on it.

[00:18:06] And I saw a stat the other day that I think it was last year, 2024, UK based that the average AP kind of fraudulent payment was a half a million pounds on average, which is massive when they're going to kind of view through that. So one slip on a Friday afternoon or Sunday morning or whatever, and you're out of pocket half a million because someone's got a bit clever with it, with AI or very well-crafted and well-timed email. So it's, yeah, it's big business. Yeah. And I think when, you know, we ban these figures about a lot of small business owners think,

[00:18:35] well, they're not really after us. They're going to be after the big companies. So we don't need to worry as much, but I actually, I experienced something quite different. I see lots of attempts with the smaller companies because they've not got the same controls in place. You know, that it's about trust and who, you know, and if Jill is messaging you going, we need to make this payment and you're busy, you're like, okay, just do it. Whereas the bigger companies, they kind of have to go through a lot more steps, a lot more formalized. And I think what we need to do is bring, I guess, that formalized structure down without

[00:19:03] affecting the efficiency of the small business. And I assume that's kind of what, you know, modern tools, modern tech is aiming to do. Is that your interpretation of this? Yeah, for sure. I always think it's like democratizing it for all businesses, including SMBs, because, you know, small companies aren't going to have thousands of people in the finance team that have three, four, five checks for everything. They're going to have to use the tech to make sure that everything goes through it correctly in a more efficient way because no one wants to have their job be kind of full-time checking

[00:19:33] the sort code manually on a printed out PDF, right? So you want something that does that for you so you can actually do the impactful work that you want to do. But it happens to all sides of the business and we kind of get a bit of feedback from our customer base, which is quite broad as well in terms of turnover of employee sizes. And it happens to everyone, like the risk is there. So they really want to counteract that irrespective of their turnover size. What does ApprovalMax do or what are they building to help prevent or reduce the risk of fraud?

[00:20:01] It's something like the core product. We'll kind of get back to the data capture and the payment thing in a second. But the core product has always been essentially built for multi-tier approval workflows. So you can have exactly whoever needs to approve it can approve it before it goes to the next level on the go, et cetera. So you kind of take the friction out of that for people. So you're not playing what I call email ping pong, trying to get someone to sign off and you store it somewhere in the cloud or got a bit of a binder. So that's in and of itself helps make sure that it's going through a correct process before someone hits pay.

[00:20:31] So that's delegation of authority. And there's also segregation of duty. So rather than having someone in zero QBO nets with like the whole team in there, you know, that could be a nightmare in terms of user permissions and stuff. You take that out of it. So it goes in. So the person in the AP department knows it's been approved before hits pay. But I guess more specifically on fraud, we have a bunch of features where it will detect if anything's changed. So if someone has a bad day, spills a coffee, it's the wrong number or something, it will

[00:20:59] flag that in ApprovalMax that actually, you know, the contact name changed or the account code changed, whatever it is, or the amount changed so that people who approved it know that actually what they've approved is now essentially not approved, right? Because something changed. You can go and speak to that person. Going back to the pay side of it, like you said, that can also tie us as like a traffic light system. So it's first time you paid someone is like an additional step.

[00:21:25] So kind of bring all that in a way that makes it super simple for people to understand where the risks may be and make sure that they have the process in place so that they don't accidentally misfire payment, become a victim of fraud because then getting the money back is super hard to do, right? Yeah, it is. You've kind of, you know, it's already gone at that point. So we've got an alert. Great. That is helpful. But if the payments already made, we're just kind of screwed, especially if it's half a mil.

[00:21:51] Well, but I think the other bit and the interesting bit where I guess approval max has gone recently is integrating that payment element. And as you say, if it's a user controlled areas away from the rest of the financial and operational tools, then you are segmenting and you're reducing risk because there's less people that can access it. And you're not having to ban approvals back via email or phone call. It's all in its own little ecosystem. So is that one of the reasons, I guess, of bringing approval max pay to help, I guess, reduce risk and fraud? Yeah.

[00:22:21] To be honest, it was customer feedback. So customers didn't want to have to have several different apps. And then if, you know, the data flow breaks or some export import situation, it adds to the risk of something changing when it's kind of going between all of these systems. And they said, look, the way that they kind of explained to us is you guys are the approvals. This is the actual like financial controls element of it, which will prevent the fraud.

[00:22:47] It'd be great if we could just hit a button here to say, yeah, that's good for payment. Or if we're going to scan a bill or PO and it goes directly into approval max rather than using another workflow. So you build a base of the customer feedback. I think the idea is that it's a one-stop shop in that regard for financial controls to prevent against that potential risk of fraud. Yeah. Well, it all makes sense to me. And I think that the number one takeaway from this is if you've got an integrated system, you've managed to segment the area that's for approval.

[00:23:16] So you've reduced risk for having too many users in there and you're not having to extract data out, manipulate it or send things via email and, you know, for a phone call to approve. You've significantly reduced the risk down. Everything else is just, I guess, a nice little cherry on top. Yeah, exactly that. Exactly that. You don't need it till you need it, but you definitely need it. Yeah. Thanks, Matt, for joining us today and talking us through fraud and approval, Max. Thanks, Ryan. Appreciate it. Thanks for joining us on today's episode.

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