On the Road to Open Accounting: Digits Announces Connect API Platform
Five years ago, we started Digits to empower business owners with real-time, accurate, and intuitive finance. We fundamentally believed that operators had the right to understand their business as it happened, and that better-informed leadership teams would achieve better outcomes.
We're thrilled to share that we recently crossed some major milestones towards this vision, with over 5,000 small businesses on Digits and over 100 Million transactions managed on our platform!
With scale comes perspective (and feature requests!), and as we continue to build out Digits' capabilities, we've been diving deep into the core challenges faced by the accounting profession that impact the quality of service they are able to provide to their clients.
I recently traveled to New York to meet with the leadership of the AICPA and it was inspiring to see how proactively they are welcoming the latest advances in AI/ML and how tightly they are partnering with the tech industry to facilitate adoption across accounting firms of all sizes. We were honored by the opportunity to share our 2024 roadmap and hear their feedback.
Today, we are excited to share our next major initiative publicly.
From Open Banking to Open Accounting
Ever since the European Union brought the concept of "Open Banking" to the forefront in 2015, many have wondered whether and when similar regulation would make its way to the US. The demand is already here: in fact, Visa found that 87% of Americans already connect their financial accounts to a 3rd-party service! Fortunately, the Consumer Financial Protection Bureau (CFPB) appears poised to publish its guidance on the topic soon.
At Digits, we've been major proponents of open banking rules for years, and we were proud to partner with the Financial Data Exchange way back in 2020 to push the industry forward. However, progress has been slow. Despite well-known efforts like Plaid, reliable connectivity to banks continues to be elusive (countless smaller banks and credit unions across the US still offer no connectivity whatsoever) and the financial ecosystem beyond banks is even further behind. While the CFPB is focused on consumer protections, the B2B space is far more broken. It is time for a better future.
Why? Business finance does not stop at banking; that is just a small piece of the puzzle. There are payroll systems, employee expenses, corporate cards, benefits administrators, payment processors, and more. Access to every one of these is required to accurately account for the business's finances and this fractured ecosystem is a major source of pain and tedium for accountants. It's common for a small business bookkeeper to have half a dozen or more separate accounts that they need to remember, log into, and export data from every month, for every one of their clients. This takes them hours.
At Digits, we believe businesses should own their transaction metadata just like they own their money. The right to access and share that data should be theirs, and theirs alone. The status quo where large retailers, card issuers, and payroll providers gatekeep what you purchased, from who, why, or for which employee is no longer tenable, and is holding businesses back.
We are calling this Open Accounting, because like existing Open Banking laws, this data should be freely available, via secure APIs, with access controlled by the owner of the data, not the financial service provider. As a business owner, if I want to grant a system, partner, or contractor access to my data, that should be my choice and mine alone. After all, it's my business!
Announcing Digits Connect
Today, we are excited to back up these words with software engineering and publicly announce that we are building Digits Connect, our open API platform for accounting data.
As Digits has scaled, we have heard countless customer requests to bring in more than just QuickBooks data, whether it be real-time purchases via Stripe, fine-grained customer data from Salesforce, or employee-level payroll details from Gusto. In business, "data is the new oil": the more it is mined, refined and processed, the more it can be turned into something useful, like actionable and automated insights.
We've also heard from accountants that fine-grained data accelerates the bookkeeping as well! As we continue to push the bounds on Digits AI, training it to auto-classify transactions as they arrive, it's no surprise that more context leads to more accurate bookings.
The Power of Modern APIs
Digits Connect is a secure REST-based API for transaction ingress and egress, making it possible to arbitrarily connect Digits to all of the financial institutions your business relies on to move money. Unlike other instrument-focused integrators (e.g. Plaid focuses on banks and credit cards), Connect has been architected from the ground up to work with arbitrary double-entry transaction data and all associated context. This will allow Digits to seamlessly integrate with a range of providers, from payroll to sales platforms.
To streamline partner integrations, we've architected Digits Connect to abstract the accounting complexity, and we've written an execution harness that makes it easy to reshape data from partner APIs into our generalized Connect transaction format:
// Transaction converts a Stripe Balance Transaction to Connect
// - https://stripe.com/docs/api/balance_transactions
func Transaction(txn stripe.BalanceTransaction) connect.Transaction {
out := connect.NewTransaction()
out.SetMemo(txn.Description)
// Balance Transactions are booked according to type
switch txn.Type {
case stripe.BalanceTransactionTypePayout:
// ...
case stripe.BalanceTransactionTypeCharge:
out.SetCustomer(txn)
out.SetEntries([]connect.Entry{
entry(txn.Amount, "Stripe Charge (gross amount)", Sales, Credit),
entry(txn.Fee, "Stripe fee", Fees, Debit),
entry(txn.Net, "Net (less fees)", Clearing, Debit),
})
case stripe.BalanceTransactionTypeStripeFee:
// ...
}
return out
}
In this example, we map Stripe transactions to Connect transactions, leaving all of the heavy-lifting (deduplication, reconciliation, etc.) to the core Digits platform. While this connector is written in Go, Digits Connect is built with OpenAPI bindings, allowing connectors in any language. The first set of connectors are already underway.
Stay tuned for additional updates, as we are excited to announce the first set of connectors soon. For those looking for more information on Digits Connect or to partner on making Open Accounting a reality, please reach out.
The Time for Open Accounting is Now
The rise of AI—driven by the rapid evolution of Large Language Models—has ushered in one of the most exciting periods in fintech since the original mainframe revolution of the 1960s and '70s, but access to critical business data is still stuck in the dark ages.
It is past-time for the US to codify Open Banking laws and it is time for the fintech industry to lead the charge into the future, placing full ownership of transaction metadata rightfully in the hands of the businesses themselves.
Let's build the future of Open Accounting together :)
