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Making quicker and more informed decisions: what role does 'open finance' play?

With the UK economic forecast looking increasingly bleak, small and medium-sized businesses are facing some real challenges. Taking into account the current financial landscape, it’s perhaps no surprise that total company insolvencies in England and Wales in Q2 2022 reached the highest quarterly level since Q3 2009.

For business lenders this has created much uncertainty, with many questioning the robustness of their review, application and onboarding processes. 

Accelerated by the pandemic, SMEs have demonstrated incredible resilience in the face of multiple challenges and uncertainties over the past few years - learning to quickly adapt and evolve.

With Brexit, the COVID-19 pandemic, and the conflict in Ukraine, all in relatively quick succession, the past three years has resulted in extensive material shortages and fractured supply chains, changes in laws and regulations and rising inflation. On top of this, small and medium-sized enterprises are also facing threats such as increased cybersecurity risks - with 39% of UK businesses identifying an attack in the last 12 months. 

With this in mind, 2023 is set to be a difficult year for businesses of all sizes, with ONS figures showing that more than 1 in 10 UK businesses were reporting moderate-to-severe risk of insolvency in August 2022. In the same period, 22 percent of business leaders identified the rising cost of energy prices as a primary concern for their organisations. While the energy unit price cap for businesses announced in September is expected to reduce pressure on firms, most businesses are set to pay higher prices, and energy is likely to remain a concern, especially during winter months as usage increases. 

As businesses everywhere are feeling the financial strain, the ability to anticipate and respond to challenges and opportunities is key. 

Digitisation plays an important role in helping businesses to remain adaptable - with 92 per cent of SMEs already acknowledging that tech is fundamental for survival, and 8 in 10 UK SMEs stating dependence on tech to start, survive and grow.

Accessing good quality credit 

To maximise adaptability, and to stand-out against competitors, it’s likely that many SMEs will look to make necessary strategic and technological improvements in preparation for the future. Because of this, an increased number of small and medium-sized businesses will be turning to lenders for manageable and fairly assigned loans. The 2022  SME Finance Survey found that 3 in 5 SMEs sought external finance in the last three years, and these figures are only predicted to grow. 

Despite SMEs accounting for more than 60 per cent of all UK private sector jobs in 2022 and a rapidly growing sector of interest for banks, these businesses continue to face challenges of accessing timely finances. In a recent survey, SME business lenders, Capify found that only 40 per cent of respondents felt confident that they would be able to secure finance from their bank. 

Research also shows that around a third of SMEs are initially declined by their banks, forcing business leaders to look for alternative methods, such as P2P lenders, specialised asset finance companies and invoice financing, or using credit cards to obtain finance and manage cash flow.

Most recently, SMEs have also been struggling to remain operational, battling to secure loans from major banks that underestimate the running costs, as inflation reaches a 40 year high and economic uncertainty makes accurate forecasting and cash flow management all the more challenging.

The solution

Poised to transform the financial services sector and to unlock the much-needed access to funding for SMEs, open finance is an extension of the familiar open banking concept, making customer engagement and data collection quick, easy, and accurate.

While open banking is the approved sharing of client information between authorised banks, open finance allows other financial providers to use this model, helping them understand more about how a business operates and how its customers use its service.

Leveraging key data sets and predictive analytics with real-time accounting data, software solutions such as the Aryza Vantage group of products deliver actionable insights within a customer's permissioned environment, enabling greater control for both the lender and the SME receiving the loan.

Greater borrowing experiences

For organisations looking for financing options, open finance offers an additional financial management solution, providing a powerful analysis of key accounting information, all in one place. Accessible via an account portal, data collected and processed from associated banks or lenders can be viewed in real-time, allowing business managers to gain a better understanding of their financial position - be that in terms of cash flow, spending, capital, investments, or goals.

With greater visibility and an increased awareness of a company’s financial situation, businesses are placed in a better position to analyse the weak points that may have restricted them from borrowing in the past. And, as providers can clearly see changes in how they conduct their operations, these weak points are more easily resolved.

With greater parity in the information both the borrower and the lender receive and review, the friction of sharing data is minimised, ensuring stronger communication between the two.

Quality credit decisioning

For lenders themselves, open finance offers a revolutionary advancement. By simplifying the collection of information, and improving overall visibility, lenders can access a much deeper overview of a client's accounts than possible with conventional practices.

Visible in an account dashboard, offering a 360-degree view of operations and overall financial health, lenders are presented with a complete picture. Unimpeded by manual processes or when the business manager files their financial reports, real-time data is pulled through automatically, providing transactional data, management accounts and Companies House information. 

This means lenders can more accurately evaluate affordability and risk, utilising a better quality of financial data for more reliable and informed decision-making when assessing whether to offer or deny credit. By presenting lenders with a better understanding of all financial shortcomings, and strengths, firms can tailor the products offered more effectively - ensuring maximum relevancy and success for each individual applicant. With more informed credit decisioning, risks are significantly reduced, security is amplified, and more affordable agreements can be safely offered to customers.

Furthermore, should an initial application be unsuccessful, given the amount and nature of the data that is visible, lenders can offer advice to each individual case on the improvements required to qualify at a later date.

Driving efficiencies

With specialist solutions developed to automate traditionally manual processes, onboarding procedures no longer have to be time-consuming and arduous. This not only makes for a significantly smoother and seamless customer journey, and a better standard of service, but is considerably faster.

With vast amounts of employee’s time being spent on routine but time-intensive administration tasks when taking on new clients, an automated system using open data to streamline the process makes for a significant cost savings. 

Creating a notable number of extra resources, without any additional investments, employees are then freed up to apply their talents and experience to more complex tasks. Time can be better spent for greater outcomes.

In short, open finance is not only an invaluable tool for the SMEs looking to borrow but is also proven to also be hugely beneficial to the financial services sector - bringing about a new wave of secure processes to help drive growth and profitability across the business lending industry. 


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Andrea Varga

Andrea Varga

Head of Innovation


Member since

18 Jan 2023



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

Open Banking

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