A few years ago, fintech meetups were abuzz with discussions about embedded finance, which was seen as the future of the industry in 2020. This strategy allows fintech companies to integrate their services into other products, giving users access to new features without needing to sign up for additional services. This approach has been particularly appealing to fintechs as it enables them to offer a new layer of products to larger banks and financial services providers.
Ember, a British startup focusing on an embedded tax solution, is demonstrating the ongoing relevance of this strategy in 2024. The company has partnered with HSBC in the UK, enabling the bank’s business customers to access Ember’s services directly from their online accounts. This partnership could potentially bring thousands of new customers to Ember.
Ember’s service automatically fetches and categorizes recent banking transactions for companies, allowing customers to track expenses, add receipts, create invoices, and manage basic accounting tasks. The platform also provides an overview of a company’s revenue and expenditure, estimates tax payments, and indicates available funds for dividends.
While larger companies might still prefer working with chartered accountants or hiring in-house professionals, freelancers and small businesses with fewer than ten employees can streamline their accounting processes using Ember’s self-serve product. According to Ember’s co-founder and COO, Daniel Hogan, existing solutions like Xero, QuickBooks, and FreeAgent are designed for accountants, not end business owners. Ember aims to offer a transformative experience tailored to business owners’ needs.
However, the market is highly fragmented, with hundreds of thousands of small companies in the UK alone, making customer acquisition challenging. Competing with major players like Xero and QuickBooks in advertising was expensive for Ember, which led the company to negotiate with big banks like HSBC UK for an embedded solution. HSBC pays Ember for each customer who opts to use Ember’s features, and customers can access additional features for a fee.
Ember also offers in-house accountants for complex tasks such as annual accounting and corporation tax management. The free version available through HSBC’s online banking portal serves as a gateway for acquiring paying clients.
Ember is not limiting itself to HSBC and hopes to announce another partner bank soon. With upcoming regulatory changes in the UK, such as the “making tax digital” initiative, accounting software is expected to see increased interest from small businesses. By 2026, around 1.75 million business owners will need to change their tax filing methods, most of whom currently do not use any accounting services.
The UK’s HM Revenue and Customs has decided to adopt an API-first approach, relying on software providers like Ember to build user-friendly experiences for more frequent and accurate reporting.
Ember’s initial partnership with HSBC and the regulatory opportunities have contributed to the company recently raising a £5 million funding round ($6.3 million) from Valar Ventures, Viola Fintech, and Shapers.
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