Blog article
See all stories »

Open Finance - don't forget about SMEs

Retail banking has always been the poster child of innovation, while SME and commercial customers are typically left behind and often undeserved. SME customers arguably require the most support from their banks, as these companies have a greater list of needs than a retail customer but may not have an in-house finance department to deal with them.

Despite this, much of the Open Finance rhetoric currently in circulation neglects the SME and business customer – even the FCA Call for Input only mentions business customers briefly.

In fact, investors have started to notice this gap in serving SME customers too, with B2B Fintechs raising 5Bn Euros of funding between Jan-Oct 2020, while B2C Fintechs only raised 3.1Bn Euros.

The needs of SME customers may also differ based on the size of the business, with the vast majority of UK businesses being sole traders.

What issues do SME customers face?

Late payments

Late payments are a huge problem for businesses and can have dramatic impacts on cash flow. This is especially poignant during the current pandemic where many businesses are fighting to stay above water. “The average invoice cycle is 30 days, most businesses didn’t get paid for 56 days, that’s now gone up to 71 days as a consequence of Covid”, Mark Hartley, Co-founder of Bankifi.

Mixing business with pleasure

Account aggregation isn’t as much of a priority for business customers as it is for individuals, as SMEs typically only have one bank account. However, sole traders will have business and personal accounts alongside a range of other financial products (e.g. indemnity insurance and home insurance). “The boundaries between what is in my name and my business name for a sole trader is a little bit more blurred”, Rachel Booth, Co-founder of Mettle.

One-way data street

There has been little conversation about standardising the way that accounting platforms handle and open up customer data. Some argue that this has created a one-way of SME financial information, which may put banks in an unfavourable position. Bankifi aim to redress this imbalance, by packaging accounting services that banks can offer to their business customers, giving power (and data) back to the banks. “I think the banks have been unfairly treated compared to other providers like accounting package vendors who don’t have to share their data, which isn’t theirs of course, it’s my data”, Mark Hartley Co-founder of Bankifi.

What can Open Finance do for business customers?

Supporting business payments

Both enhanced data integrations and payment initiations will serve to improve the rate at which small businesses get paid for their products and services.

Mettle helps its customers with invoice matching, tracking and payment reminders alongside the option of integrating with accounting package removing a significant administrative burden for small business owners.

Similarly, Bankifi are working hard to bring Request to Pay (RTP) to business banking, with the aim of saving SMEs and sole traders time on matching and chasing late payments, as well as reducing their fees. The opportunity for Open Banking payment rails to reduce payment times and reduce extortionate merchant fees is tremendous.

Supporting business decisions

Both cash flow management and lending present great opportunities for optimisation using Open Finance.

Finstant layers chatbot based cash flow forecasting with nudges that the business will need for key decisions along the way. Embracing the very essence of Open Finance, these nudges will provide timely recommendations of both financial and non-financial products that the business needs from its corporate partners.

Account Score use Open Banking data alongside additional data streams (such as Companies House APIs) to help lenders to determine SME creditworthiness to provide them access to finance.

Similarly, in a single integrated passport, Experian provides access to SME credit information, management account and bank transaction data to support loan decisions. Crucially, it also helps validate the authenticity of an SME to reduce loan fraud.

Supporting employees

Through employee benefits platforms, providers are creating solutions that help employees to better manage their money, which has a direct positive impact on employee wellbeing and productivity.

Portify is partnering with organisations in the gig economy to improve the credit worthiness and financial wellbeing of their workers.

FastPAYE and Wagestream allow employees to access their wages once they are earnt, disrupting the monthly payment cycle.

OpenMoney’s WorkLife benefits platform makes personalised financial advice easily accessible to employees.



Comments: (0)

Josh Rix

Josh Rix


Woodhurst Consulting

Member since

28 Jan 2021



Blog posts


This post is from a series of posts in the group:

Open Banking

Open Banking regulation, innovation and technology and it's potential to revolutionise the Financial Services Industry.

See all

Now hiring