Open banking mooted as solution to SME financing woes



Open banking can be used to help small- and medium-sized enterprises (SMEs) struggling to access finance, according to new research from alternative business lender Iwoca.

35 per cent of accountants said that the biggest challenge for SMEs is access to finance, while 52 per cent said that the biggest financial issue for their small business clients is a cash flow squeeze.

Iwoca’s research found that open banking could be used as a solution to both of these problems.

In a survey of accountants representing 25,000 SMEs, just 18 per cent said they offer clients support with sourcing finance, while only 25 per cent said that they offer cash flow support.

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“Considering the increasingly volatile economy at present, which is forcing many small businesses into a cash flow crisis, it’s disappointing to see that so few accounting firms offer tailored solutions to this issue,” said Colin Goldstein, commercial growth director at Iwoca.

“Our data suggests that open banking can help. But, to increase adoption, a change in attitude is needed: accountants need to proactively engage with clients about the ways open banking can solve real problems for them, and providers need to demonstrate trust and reliability in their solutions.

Read more: Nearly half of financial institutions have adopted open banking

“Firms that can harness the power of open banking have the potential to create significant competitive advantage: through using open banking technology to solve the problems that matter the most to their clients, they can grow their client-base while reducing overheads.”

Iwoca noted that open banking can lead to more thorough, accurate and up to date data for cash flow forecasting apps, and this live data feeds into easier finance application processes for small businesses.

However, the results of the survey found that open banking adoption was still low among accountants, with 34 per cent of accountancy firms still not using the finance-checking technology.

Read more: Open banking boasts six million active users