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Having successfully processed its first full funding application via open banking, Jonny Hawkins, head of data science at Liberis looks at the benefits of open banking and the doors it could open for so many small businesses looking to grow.
Sourcing and securing the right funding for a business, whatever its state or size, is one of the biggest challenges in the current climate. Earlier in the year, our research into the SME space found that over 60% of small UK businesses said they require funding to grow, but 57% were unsure where to source it from.
For many UK businesses, it’s becoming increasingly more difficult to obtain this funding due to stricter control on credit histories, legislations and current trading conditions.
However, the tides are changing and in addition to traditional support from banks, more alternative financing options for small businesses are coming to light. Liberis is just one example of an alternative finance provider on a mission to help UK small businesses, helping them secure that important funding and achieve their long-term ambitions.
Greater flexibility, convenience as well as complete transparency over your transactions are all benefits of alternative finance options. And with further technological developments on the horizon, new concepts such as open banking are set to enhance their benefits even further.
Open banking and its benefits
Open banking is a safe and secure way to give providers access to your financial information quickly and efficiently, saving time and hassle for your business. They can access this through collaboration with open service developers and then use the data to decentralise decision making.
For small businesses looking to secure funding, open banking enables providers to gain instant access to their current balance, incomes, outgoings as well as an assessment of their financial status. Funding providers would have previously completed these tasks manually but open banking cuts out this long-winded process by automatically connecting data to a provider’s underwriters.
By making the funding application process easier, faster and fairer for small businesses, more UK small businesses will be supported to achieve their ambitions and support further growth. Ahead of the curve, Liberis is already making use of this data and has successfully completed its first full funding application for the first time. A true milestone for the financial world and a first glimpse of a world where businesses previously turned down by banks will receive access to that important funding because of open banking technology.
What does the future hold?
This smart data approach has the future potential to empower better lending decisions to all and, in three to five years, the lending space is therefore set to shift. This is for three main reasons: regulations, such as Basel III; long-winded legacy underwriting systems; and poor customer experience.
While there is some friction with open banking due to its infancy as early adopters of this new technology, we believe the benefits will be second to none and we want to be able to deliver this to our customers as soon, and as safely, as we can. Data protection and security are top of the agenda for many businesses and by harnessing this technology at a time where data is more readily accessible, it’s an exciting time for the lending space.
The use of open banking technology is a watershed moment for small businesses finance and will fuel small business growth, vital for the wider UK economy and society itself
Jonny Hawkins is head of data Science at Liberis, the leading alternative finance provider, offering a better way to finance UK small businesses