Technology is now an unavoidable aspect of our lives. It is not only changing the way we live, but it is also improving the way we do business, and Wave is a testament to that. Wave is an online platform offering a wide variety of accounting related services to small businesses. From Invoicing, to tracking expenses, income and payments, to payroll and receipts, wave is trying to establish itself as the one stop shop for all accounting needs.
The idea behind Wave was born when co-founder Kirk Simpson realized that accounting, invoicing, and payroll were the most outdated and the most looked over aspects of the business. As a former tech company owner, Kirk was surprised to see that there was no simple, free, and technologically advanced software that small businesses could leverage and improve their operations. In 2010, Wave was founded by Kirk Simpson and James Lochrie with only 8 employees. Wave raised about $80 million in funding over 9 rounds. It was sold to H&R Block in 2019 for $537 million.
The success of wave can be attributed to their simple approach leveraging technology to solve an existing problem. Unlike several Financial Technology companies trying to capitalize on technological advancements and innovation, wave was able to identify a problem encountered by small businesses around the world, and provided a free, and simple solution using existing technologies. Because the founders realized that most large companies typically have custom software or custom applications, they decided to focus on small businesses and built their business model around that. The wave platform and most of the services offered are entirely free but they do charge for their payment’s platform as well as their payroll services. They attract small businesses by first offering their free services, and because it is more convenient to have all operational aspects under one roof, they end up signing up and using their paid services.
Wave uses machine learning that learns from categorization behaviors as well as overall preferences to automatically and accurately categorizes their customer’s transactions. Their software come equipped with two different predictive models. The Wave model powered by deep learning and natural language processing. This model learns with the billions of transactions that flow through the wave platform, including transactions from other businesses. The second model offered is a more personalized model that learns specifically from the transaction of the business using it in real time. Both models work hand in hand to deliver the most accurate categorization to customers. It is essentially like having a bookkeeper that learns over time and is capable of analyzing billions of transactions.
Wave is also currently developing and application programming interface covering invoices and transactions. As more businesses started using Wave, they have realized the need to connect directly to other systems alongside wave so that data can flow between systems with no delay or re-keying. This is a technology in development and should be available in early 2021.
Wave is evolving in the Financial Technology domain of the financial industry, more specifically the accounting software aspect of it. This is a domain that has lacked innovation and trends in the past few years. However, we have recently seen several other start-ups trying to tackle the issues faced by the industry. Businesses are realizing that relying on a bookkeeper is no longer efficient and that a more digitalized approach is the way to go. Software such as Wave are trying to deliver data entry services with immediate access to performance reports and record keeping services. However, Wave is the only one trying to disrupt this corner of the financial services industry.
QuickBooks is one of the biggest names in accounting. Their software has been around for decades and has established itself as the pioneer in the world of accounting. However, QuickBooks services are somewhat expensive for small businesses and this is where Wave has an advantage. FreshBooks is another big name in the industry. This cloud-based software is offering a complete accounting solution with great customer support, over 70 possible integrations, and a customer friendly interface. However, it is also fairly pricy for businesses which once again makes Wave’s business model very attractive and efficient.
It is now an established fact that wave has been growing and is clearly becoming a leader and a household name in the accounting industry. As of 2020, 10 years after its creation, Wave has over 3.5 million users, 250 employees, and declared revenues of $52 million in 2019. Because it is a private company, financial performance data is fairly limited. However, when looking at metrics such as user base growth, company size, and variety of services offered, Wave is performing fairly well relative to benchmarks. Although revenues are still fairly lower than their direct competitor, for example QuickBooks with revenues over $700 million, Wave is still a financially healthy company with an attractive business model. Since they were able to attract so many users by offering the bulk of their services for free, they have to be more efficient when it comes to cross-selling. The ratio of paying customers to total number of customers is still fairly low (No official data available only estimates based on cost of services and amount of customers). If Wave wants to keep up with their growth, they have to make sure that they can monetize on every customer.
I believe that Wave is doing very well, however there is always room for growth. After analyzing customers satisfaction reviews, several topics keep coming back. The interface is easy to use and visually appealing, but customers have been complaining about the dashboard lacking key information. There needs to be specific surveys about what customers are looking for and what type of information they would like to see. Wave also offers about 12 accounting reports based on the data inputted, whereas Xero (one of its competitors) is currently offering 52 different reports. The development team should focus on taking advantage of all the customer and transactional data and provide data analysis services even if it has to come at a cost. Data is at the center of every business decision, and based on the overall landscape, it is not enough to just provide accounting services. It is also crucial to make sure that customers have access to their data and that one of the services provided is the interpretation of that data.
One of the other main complain is that Wave accounting is too slow, whether it has to do with internet connection or the way the app is coded, something has to be done. This is not an isolated incident which pushes to believe that the app can be coded more efficiently. And finally, the API. Wave currently has an API, but it is not offered to third-parties. Businesses like to automate and streamline their processes and it is currently impossible to do so.
Overall, Wave is a perfect solution for small businesses that are just getting started or small businesses that have just begun the digitalization process. However, Wave might lose customers because of the lack of integration and the lack of data analysis and data interpretation services offered. It is also crucial that Wave keeps up with new technologies. The Financial Technology industry is one of, if not the most dynamic industry in the world. New technologies are being invented everyday and new companies are being founded daily. Investing in research and development is of extreme importance.
https://www.waveapps.com/about-us/about
https://www.techradar.com/reviews/wave-2020
https://www.vinewave.com/blog/21-reasons-why-we-switched-from-wave-accounting-to-xero-edcdfa6d2cc4/