Report on Open Finance sets out benefits to SMEs

The Centre for Finance, Innovation and Technology (CFIT) has published a report setting out the full potential of Open Finance to deliver direct benefits for UK businesses as well as consumers. The findings show how better data-sharing can provide improved access to credit for companies.

A CFIT-led coalition of more than 60 partners - including Citizens Advice, Experian, EY, the FCA, FDATA, HSBC, IBM, Iwoca, KPMG, Lloyds Banking Group, Mastercard, Monzo, Revolut and various regional association and industry bodies - worked together to develop new solutions to unblock barriers to secure data-sharing across the financial services industry. Alongside a strategy for the future of Open Finance, which allows SMEs and consumers to access and share a wider range of their financial data, the CFIT has published two ‘proofs of concept’ developed by the coalition that show the full potential of this technology.

A successful pilot analysis with HSBC UK showed that Open Finance could deliver more lending to SMEs. It demonstrated that accessing new datasets and auto-populating business loan applications can lead to a significant boost in lending decisions. The exercise suggested that over a quarter of businesses in a sample of SMEs whose loan applications had been referred for manual underwriting, and who risked missing out on credit, could be given access to finance, had Open

Finance been in place. The work - which used synthetic data and profiles of SMEs based on HSBC business customers - also showed that embracing Open Finance could lead to a fall in the number of businesses that give up on applications before they are complete. These proofs of concept will now be released to the UK fintech and financial services industry to be built into fully fledged prototypes.

The new report also delivers the new partnerships and blueprint for Open Finance previously called for by the Kalifa Review of UK Fintech. CFIT - a body created last year on the recommendation of the Kalifa Review - sets out a series of recommendations to unlock the estimated £30.5bn of GDP growth that Open Finance and personal data mobility could provide. These include the development of an Open Finance roadmap as part of a long-term regulatory framework, as well as an implementation entity empowered to drive this work forward, which could be modelled on Open Banking in the UK, led by Open Banking Ltd (OBL - formerly OBIE). The Joint Regulatory Oversight Committee and OBL will be setting out their plans, includinga proposal for a new implementation entity to deliver non-CMA Order work, and a vision for the future delivery of open banking and beyond at the end of Q1.

Other recommendations within the Coalition’s report include: setting up a taskforce to build on the coalition’s work in prioritising other ways that Open Finance can deliver better outcomes for businesses and consumers beyond credit; and the development of a viable commercial model to incentivise businesses to securely share financial data.

Ezechi Britton, CEO of CFIT, said: “The prize on offer from getting Open Finance right is enormous. For SMEs, it means more control of your finances and easier access to more affordable credit.For the fintech sector, it is an opportunity for the UK to set global standards and drive growth worldwide. And it dovetails perfectly with the Government’s wider ambition to build a smart data economy. Having definitively proven the business case for Open Finance, we’re now looking forward to working with government and industry on furthering the case for unlocking the necessary datasets, scaling the proofs of concept developed by the coalition, exploring use cases beyond credit and identifying the commercial model and future framework that will encourage secure data-sharing.”

Chris Hayward, policy chairman, City of London Corporation, said: “As the world’s leading financial innovation hub, the City of London Corporation recognises the transformative potential of Open Finance for the UK economy. Through its inaugural coalition, CFIT is showcasing the power of leveraging financial data to deliver better financial outcomes for both consumers and SMEs. We are committed to supportingsmart data initiatives such as the one taken by CFIT.”

Upcoming Events