Machine learning, AI at heart of new Xero products

Friday 09 September 2016 04:55 PM

Xero CEO Rod Drury says machine learning and AI at heart of its new products

By Fiona Rotherham

Sept. 9 (BusinessDesk) - Rod Drury, founder and chief executive of accounting software company Xero, says it’s poised to introduce a number of smart services through machine learning and artificial intelligence.

Xero has now completed the two-year migration of its global platform onto to Amazon Web Services which allows it to use AWS’s additional machine learning and artificial intelligence services to delve into the $1 trillion in transactions Xero handled in the past 12 months.

In his keynote address to Xerocon South in Brisbane today, Drury recounted how the $400 million of investors' capital spent on developing the company’s software development to date has set up a global platform capable of taking advantage of the huge data set it compiles from small business customers.

Xero now has 717,000 paid subscribers globally and Drury said it was well on track to hit its target 1 million by the end of the March 2017 financial year.

Machine learning is already in people’s everyday lives without them really noticing, such as Uber being able to tell travellers how long their trip will take, Drury said.

“We can see machine learning in our personal life and it is our job as software developers to really get this happening in our business lives as well. That’s what our entire team is focused on because we think it is really the next wave and it’s here now,” Drury said.

In one example, machine learning has revealed Xero small business owners, particularly tradies, are terrible at coding invoices for payment once a job is completed. Most simply code a job to sales, the first drop down on the software menu, or to general expenses rather than the right one.

By early next year Xero hopes to be able to eliminate small businesses having to code because the machine learning will let it be done automatically when the daily bank reconciliation arrives. Any mistakes can simply be picked up later by accountants and bookkeepers as they are now under Xero’s time-saving find and recode function.

Drury labels eliminating coding as “one of the biggest changes to ever happen to accounting”, saying it will save small businesses thousands of hours.

Another innovation due for launch next month is a Facebook Messenger chatbot linked to Xero where small business owners will be able to pose questions such as ‘how much money do I have in my bank account?' or ‘who owes me money?' and get instant answers.

Xero is also adding in other features such as recommending firms that can help with bad debts if a company has a problem with late payments of money owed or, if they’re looking for an accountant, the chatbot can recommend firms in their local area that specialise in their industry.

The big data is allowing Xero to offer accountants more insights such as 22 percent of small business customers having multiple banks. It has just added an explorer programme for accountants and bookkeepers which lets them see who their customers are banking with and what industry they are in.

“Who would have thought the accounting software was the abstraction that links it all together,” he said. “We’re not just looking at what one person did, we’re looking at how hundreds of thousands of small businesses work.”

Key to using the smart services to introduce benchmarking for small businesses is being able to tell where they are, what industry they’re in, and seeing all their financial information.

The last leg still to resolve is what industry the firms are in and the new explorer programme allows accountants to input that themselves, which Drury said they’re incentivised to do as it will lift their industry rankings on the online directory and chatbot.

Xero is aiming to differentiate itself from competitors by aligning itself to the “fintech” theme (financial technology) emerging in financial markets. Accounting software sits at the heart of these new payment systems.

It has made a number of announcements at Xerocon on new software iterations, such as Live Contacts, that allows small business and advisers in New Zealand and Australia, and soon the rest of the world, to automatically link into public information on millions of business within the Xero platform and update it when any change is made.

The announcements themselves are relatively small beer, other than to accountants, but they reinforce Xero’s pitch that it is globally leading the charge on accounting technology.

Last year it began describing the global platform as a “financial web” with more than 80 financial firms such as banks and payment providers linked in and more than 500 app providers offering curated services to small businesses to help them grow faster.

Drury said the software-as-a-service company has had to be disciplined about focusing on “beautiful accounting software” but in the near future Xero will also look to add other services itself rather than just through partners as an additional revenue stream.

Xero has put off a planned listing this year in the US where growth has been slower than some other markets and incumbent Intuit remains the market leader. Drury said three things have to happen before it can list in the US: making more than $100 million revenue a year which is has already achieved; the market being right for tech listings which is starting to turn; and convincing US investors that Xero is going to take more than 20 percent market share in the US which is yet to happen.

Drury, ever optimistic, said it's winning on the technical front and partnerships like the one Xero recently signed with the Wells Fargo Bank should help significantly boost growth in the US.

“Go time will be next year,” he said.

(Fiona Rotherham travelled to Xerocon courtesy of Xero)

(BusinessDesk)

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