Small businesses and smart data
How can open banking and smart data unlock access to cost-effective finance for the UK’s small businesses?
Martin McTague
National Chair, Federation of Small Businesses (FSB)
The Government’s National Payments Vision, published in mid-November, places central importance on 'building for tomorrow' – that is, supporting innovation, competition, and security in how payments are facilitated, to improve the environment for businesses and consumers alike.
We know that long and sometimes confusing application documents, which call for financial information which small business owners may not have at their fingertips, are off-putting to finance applicants, and often lead to abandoned applications.
Open banking and smart data hold enormous potential to make application processes smoother and far less time-consuming, which could help small firms access the funding they need to expand. Funds could also arrive in small firms’ accounts in a timelier manner as well, thanks to the speed and efficiency of open banking-empowered systems.
The wide array of different kinds of finance can sometimes be confusing to time-poor small firms, which may prefer to apply for kinds of finance which they have used in the past, even if a different kind could better suit their needs.
If lenders can harness smart data to suggest different kinds of funding tailored for individual firms’ profiles, that could help to support small businesses’ expansion plans.
Charlotte Crosswell
Chair, Centre for Finance, Innovation and Technology
Open banking remains the template for the benefits of secure data-sharing. We are now seeing real progress towards rolling out open banking-style data sharing across the wider financial services ecosystem — the next major stepping stone towards a smart data economy.
Open finance enables SMEs to access, control and share a wider range of their financial data with third-party providers, aiding transparency and potentially enhancing access to credit by providing lenders with higher-quality information on businesses.
Its potential to drive economic growth by facilitating easier access to credit for SMEs, enabling them to invest in measures that boost productivity and employment, is reflected in how the government has prioritised the Data (Use and Access) Bill within its legislative agenda. The bill recently passed through its second stage in Parliament, championing smart data schemes, and was a key recommendation of CFIT’s SME Finance Taskforce.
We’ve seen real momentum build up in 2024 with CFIT’s inaugural coalition releasing its Open Finance Blueprint and the publication of our taskforce’s recommendations, all of which have been taken on by the Government.
It is crucial that we further accelerate the progress made by industry and government in 2025 to fully unlock cost-effective finance for UK SMEs.
Conrad Ford
Chief Product & Strategy Officer, Allica Bank
As our economy has shifted towards service sectors, less and less SMEs have tangible assets such as buildings or machinery to use as collateral for their borrowing needs.
To support firms in our fastest-growing sectors, lenders will need to innovate, and smart data has an important role to play in unlocking new ways to lend based on live insight on each SME’s performance.
Doing this will give funders more confidence to lend and get growth capital to the SMEs most worthy of it. If we get this right, we can help to increase the UK’s investment rate – famously the lowest in the G7 group of countries – which is key to helping overcome the UK’s longstanding productivity challenges.
