Home Merchant cash advance Who’s Afraid of Open Banking? Answer five questions about how technology has changed the game for corporate finance

Who’s Afraid of Open Banking? Answer five questions about how technology has changed the game for corporate finance


Open banking plays a crucial role in the financial sector, but few companies know how it works and the benefits it brings them.

Often, Swoop’s work begins when the bank says “no”: a business found it needed to borrow money for a project, to cover a bill, or to buy property, went to its bank and was turned down for the funds.

While everyone in the bank can agree that it’s a great use of money, the customer is good, and the business is healthy, sometimes those reasons alone aren’t enough to get the money in. in your business account.

Enter Swoop: we have access to the entire corporate finance market. How many lenders does this represent? The number keeps growing, but at the time of writing it is over a thousand. It used to be seven. No wonder businesses need a helping hand to find their way in this complex and diverse world.

What changed?

In a word, digitization. The UK financial services industry is one of the most innovative in the world and over the past decade has invested heavily in digitizing the industry. Whether that means your traditional bank (Lloyds, NatWest, etc.) has offered an app for your mobile or you’ve signed up with a digitally disruptive bank (Starling, Monzo, etc.), you’ll probably be used to performing online payments, check your balance online, and do the banking you used to go to a branch through your computer.

Open banking relies on banks storing their data on computers and sharing the information securely with each other.

What is Open Banking?

Open banking is the process of sharing banking information and data, such as account type, transactions made, standing orders and direct debits, with other entities. This information powers your online banking experience so that the things you need are presented to you while the products that are irrelevant or for which you are not qualified are hidden away. Open banking proactively adapts its offer to your profile and makes recommendations to you as a client while helping service providers to develop new services more suited to your needs.

If you use accounting software, you are already using open banking, as these platforms leverage data extracted from your business bank account.

Why is this important for SMEs?

The benefits of open banking for SMEs are that lenders are increasingly able to offer products that meet the needs of these customers. For example, the Merchant Cash Advance (MCA) is a relatively new product that meets the needs of businesses that experience strong seasonal fluctuations: the lender sets a price on the amount they lend and repayments are made as a percentage of your card credit. Received. The more business you do, the faster you repay.

The other reason SMEs need open banking is so better decisions can be made by lenders and solutions can be found. Rather than manually sifting through hundreds of lenders and thousands of products, APIs (which are the means by which two computers communicate with each other) can find the most appropriate existing product for your needs. Just because your regular bank isn’t lending you money doesn’t mean there aren’t other lenders who are hungry for your business.

Can you trust open banking?

Open banking is regulated by the FSA. This means that companies must follow strict rules and strict standards to keep your data safe.

With open banking, you share the minimum data necessary for the product or service you wish to use via a secure and encrypted digital process; consent can be withdrawn at any time.

The final layer of protection is that if something goes wrong, your bank or building society is obligated to refund your money in the event of an unauthorized payment. You are also protected by data protection laws and the Financial Ombudsman Service.

What are the advantages of open banking?

Through open banking, an institution may be able to see that you are spending a significant amount of money on rent, energy, or currency. They can then come up with deals for the customer to save them money, such as a commercial mortgage, a cheaper energy rate, or a better currency deal.

In the future, lenders may come up with more innovative products that better meet business needs than traditional unsecured business lending.

If your bank says “yes” quickly, congratulations, you’ve struck gold. But beware: there are hundreds of other lenders out there and unless you think you were lucky with the best deal the first time around, it may pay you to shop around.

Swoop uses open banking to help SMEs access financing in the form of grants, loans and equity. The company also finds better deals for customers on a range of must-have products and services.