The UK’s CFIT is building open finance solutions for providing financial advice and assessing SME loans

The United Kingdom’s Centre for Finance, Innovation, and Technology (CFIT) recently revealed that it is working on building two open finance applications. These will focus on two goals — providing financial advice to vulnerable users, and increasing the speed at which credit assessments for SME loan applications are completed.

The new initiative will build upon the existing proof of concepts that were already conducted previously with HSBC and Citizen Advice. The goal is to help speed up the adoption of Open Finance solutions throughout the UK’s financial services sector.

How can SMEs benefit from open finance?

The UK found that accessing new datasets and auto-populating loan applications for businesses can considerably boost SME lending decisions. This insight comes from the original SME PoC and HSBC usage.

CFIT’s report examined a sample of SMEs whose loan applications were referred for manual underwriting. According to the findings, at least one-quarter of cases from the sample would have resulted in the SMEs getting access to finance if open finance had been introduced earlier.

Furthermore, they also found that many SMEs give up on applications, believing that they would be rejected.

Now, the agency is calling on other SME lenders, such as Barclays, to collaborate on the project that would result in the creation of a working prototype. It also argues that the prototype could close a massive funding gap of over 22 billion pounds for the country’s SMEs.

Helping vulnerable clients

Apart from that, Barclays is also collaborating with the CFIT on pilots that would increase the care provided to vulnerable consumers. The idea is to provide Citizens Advice client teams with access to open financial data, from which they could draw information and provide more rounded advice to customers. This would significantly improve the lives of citizens with financial concerns, who struggle with debt and similar issues.

As mentioned, the initiative will build on top of an existing product — a dashboard that CFIT previously produced with Citizens Advice. This is expected to result in a system that would allow clients to share their financial data seamlessly, and in return, receive special, individually tailored financial advice.

More than that, the system is expected to provide this service to as many as 40% more consumers facing financial difficulties. Annually, that could mean supporting up to 150,000 more people than now.

Commenting on Barclays’ role in the initiative and the Taskforce, the director of open banking, Jason Turner, said that the environment in which consumers and businesses operate is changing rapidly. Cross-industry technology is emerging with a vital role to play when it comes to meeting these entities and taking care of their evolving needs.

CFIT’s own CEO, Ezachi Britton, also commented on the new initiative, stating that CFIT launched in 2023 to enhance the UK’s fintech sector. Its purpose is to make the sector better by delivering benefits meant for both the SMEs and consumers alike. But, ideally, its impact would positively affect the entire economy.