Software alone has not been able to give tax accountants what we need. It costs a lot to develop, industry adoption is traditionally low and, technically speaking, it’s just really hard to get a good grasp on changing tax laws. But that’s all changing now!
A shift is happening in the marketplace as fintech takes on tax. Over the past two years, start-up tech companies have entered the tax space looking to level the playing field, working to bring more higher-end services to everyone while delivering them better, cheaper, faster and with more transparency. Fintech is what connects all those things.
Fintech leverages digital data
Today, people use different financial products, all operating independently from one another, where the data exists on its own. This is all digital data that can be leveraged — banking data, investing data, tax data, all of it.
Fintech can build on those foundations, which are essentially data silos, and connect everything together. Anyone can benefit. Financial data, to be useful, has to be used during the year, not just when it’s time to file your taxes. People should be able to have a pulse on their financial situation at any time. The right technology can bridge that gap.
The goals of fintech and tax technology are to make taxes more approachable and humanized for everyone. It needs to be simple and transparent. People need to move beyond thinking of tax as a necessary evil, even beyond a painless experience. Rather, taxes should be a year-round activity that’s actually quite interesting and insightful, something that can really be enjoyable.
The time is right for disruption
Disruption is coming one way or another. There hasn’t been a substantial investment in tax technology in 20 or 30 years. Since that time, taxes have become much more complex. The tax code is thousands of pages longer, and businesses have used patchwork technology to approach complex tax strategy. And while taxes are more complex, technology is so much more advanced than it was a couple decades ago.
Technology is only part of the equation. Money movement is critical when we think about tax and this new world. Venture funding recognizes this and also knows that disruption hasn’t occurred in decades. It’s a captive market because taxes are mandatory. Tax technology checks a lot of boxes for those looking to invest.
Fintech and public accounting
There’s an obvious consumer benefit for tax disruption. But what about tax professionals? Fintech won’t replace public accountants and CPAs. It will make us even more valuable!
Most CPAs are having a hard time doing straight 1040s at a reasonable rate. It’s too cost prohibitive; there’s a lot of work, a lot of data collection, for not a lot of return. But when you put fintech in the middle of that, now you have a solution that handles the everyday compliance and does it automatically, year-round. Now these same CPAs could go back to giving really good advice and spending their time doing advisory work. CPAs will be able to do so much more for their clients.
This tech can also help with the tight labor market. There are generally fewer people available to do this type of work. Whether your firm is fighting for the best talent or just struggling to find people to fill the seats for busy season, the labor shortage is very real. It’s a big challenge for a lot of firms, and this is an issue that’s not going away. Technology levels the playing field for firms as much as consumers.
Looking in the crystal ball
In the next two years, fintech will be even more refined than it is now. Taxes may be driven by a data science machine learning platform that really personalizes the tax and financial experience for consumers. No matter which way fintech companies go, the tax world will be more value-driven, transparent and accessible.
Fintech gives us the opportunity to revolutionize the tax engine and make the whole process more human. Change needs to happen. These are big ideas, and they open a whole new world of opportunities.
