Xero Rolls Out Payment Services – Closing More SMB Loops

The advent of cloud computing brought with it the promise of increased efficiencies for small and mid sized businesses. These efficiencies were to be created by the very fact that the software, situated as it is in the cloud, is by definition connectable with other products and services in the cloud. To use an analogy, cloud software floats in the ether where it is in close proximity to other cloud services, desktop software on the other hand sits within the walled garden which is the desktop PC, connecting it to the outside world is at worst impossible, and at least difficult. This promise however takes time to deliver upon, and is tempered by software vendors needs to create core functionality while still thinking about added value that only the cloud can bring – while deep integrations are useful, if the core product isn’t robust and full featured, they’re kind of irrelevant.

As Xero has built scale in their product, they’ve had a chance to look at higher level functionality – case in point is the integration of payment services that Xero introduced this week. A few months ago Xero rolled out online invoices – essentially what this meant was that rather than emailing or posting a static document for an invoice, Xero users could offer their customers a specific URL which took them to an online invoice. At the time there was some disquiet from the Xero community about the move. As I said in a post at the time:

An added part of the roll out however was the introduction of a link at the top of online invoices which takes customers to a customer portal where they can see their invoicing history and amounts outstanding. Again a super valuable addition to the product. Things got a little unstuck however due to Xero’s understandable desire to track an audit trail around who is opening these invoices. The “link to other invoices” button takes end customers (ie the customers of Xero users) to a page which allows them to either login to Xero (if they’re already a user) or set up a free Xero login that gives them access to their invoice history.

This is a seemingly innocuous step, and one which, after the small hurdle of registering, will drive some real efficiencies for businesses. The problem, as shown from the large number of comments on the Xero blog post is that this is the first time that the customers of Xero users have been presented with anything that specifies the origination of the invoice. Previously emailed or printed invoices came in a fairly generic format that could have come from any number of accounting solutions (or a word template for that matter).

Soon after the online invoice introduction I bumped into Xero head of design Philip Fierlinger and we chatted about the realities of introducing a piece of functionality that will, in time, offer users significant added value – there’s always the inevitable push back from those who have concerns about the reasoning behind the move. As I noted in the original post, perhaps Xero could have introduced the functionality a slightly different way, but focusing on that misses the point of the downstream benefits that can be driven.

Which brings us back to the announcement this week. Essentially what it means is that customers who view an online invoice see a big fat “Pay Now” button which they can click on – they enter their credit card details and the payment is processed. It saves lots of time for the end customers, and for the Xero user it closes the loop between invoicing and accounting – the money shows in their nominated bank account, the payment is automatically created in Xero and tied to the relevant invoice line. It’s a little thing, but another proof point of the inherent value of cloud versus desktop software. At the moment this functionality is integrated with the following payment services:

It’s a valuable service, both in its own rights, but also as an indication of where value can be delivered by cloud solutions. Xero isn’t the first to do it, FreeAgent rolled it out last year for example, but it’s something that is unique to cloud solutions and is a good indication of where the future lies.