Funding Options adopts open banking solutions even though the industry has far from adopted it yet

From helping businesses survive the coronavirus crisis to revolutionising finance, Funding Options is bullish about the impact open banking could have as the FinTech embraces the data-sharing scheme.

Funding Options is the FinTech company behind a business finance marketplace. It has just announced that it is now using open banking as part of its offering. By doing so, it would slash the time needed for businesses to access finance from days into minutes.

This is thanks to open banking allowing prospective loan-takers’ transaction history to be immediately available to the some 20 lenders that use the open banking data as part of their analysis for credit decisions. These include Just Cash Flow, YouLend, Liberis, iwoca, Newable and White Oak UK.

Funding Options’ open banking adoption also means that lenders can more easily make a decisions about whether or not to approve funding to SMEs as they can judge the applications more easily  based on the standardised data.

Open banking is part of the regulations laid out in the EU’s revised Payment Services Directive (PSD2). What it essentially means is that big banks and other financial services providers would have to open up their customer data to third-parties to ensure smoother services. They would do that through so-called application programming interfaces (API).

Simon Cureton, CEO at Funding Options, is optimistic about what it will mean for the industry and for his own company. “Open banking has the potential to transform the business lending landscape, improving the experience for the customer while also improving security and response times for lenders,” he said. “We’ve already seen a number of customers using the platform and successfully receiving loans, which highlight the value and benefit from shared data.”

With COVID-19 still affecting regular business practices, Cureton also argued that the announcement could not be more timely as open banking could make it easier to deliver funding faster to businesses whose cash flow and revenue have been disrupted. “In the face of the current health crisis, when access to finance is vital for the survival of many businesses, reducing the time it takes to go from application to draw down is of paramount importance,” he said.

To date, roughly 200 British finance providers have enrolled in the UK’s open banking scheme. This is only the beginning, Cureton argued. “In time, open banking will be adopted across the board and we will see the true potential of how data can be used to improve all aspects of business finance,” he said. “This will require some behavioural changes and, as an industry, it’s up to us to lead this revolution and improve the experience for all our customers.”

However, not everyone is as optimistic as the Funding Options CEO. While open banking has been around for a couple of years, the industry has yet to see any mass adoption of the solution. Tom Blomfield, CEO and founder of challenger bank Monzo, recently argued that so far the “positive effect of open banking on innovation has been nil.” Instead, he argued that the scheme has just led to massive costs for startups as they try to live up to the new regulations while traditional financial service providers were seemingly dragging their feet.

Caryl Regnault, senior product manager at Funding Options, is familiar with the lack of mass adoption. “Although there are several resources out there published from credible sources and industry bodies such as Which, Money Saving Experts, FCA and Open Banking Org, it can be overwhelming for individuals to understand the value of open banking,” she said. “This opens up uncertainty which is coupled with concerns around data security. It’s important to recognise that streamlining processes using the data is not compromising the security of customer data.

“At Funding Options, we have made a conscious decision to ensure our business finance specialist teams are in contact with our customers over the phone to avoid relying solely on email, which could be mistaken as a phishing attempt. Our teams will talk customers
through the data usage, security measures in place and consent of data access so they can understand the value.”

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