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Is Open Banking the key to unlocking lending?

Ahead of our NACFB sponsorship, our CCO Simon Lyons explains why the next phase of Open Banking may be the key to unlocking lending.

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It has been 17 months since the launch of the UK’s Open Banking initiative and the stats are climbing far better than expected. Many entrants have joined the market and are providing value added services for the consumer and aggregator. This new ecosystem is growing very nicely.

Last month’s Open Banking World Congress commented that the number of Payment Initiation Service Providers (PISPs) and retailers getting the benefit is slow. This doesn’t surprise me. We are expecting considerable change from a lot of legacy kit, so we need to be patient. If we look at the change the banks went through for PSD1 (Payment Service Directive 1) and their transformation projects, we must be realistic. A retailer using a Shopify may be able to react quickly. A more established retailer may struggle a little.

What is interesting is the focus. At present the population of apps and services seem to be heading down the comparison route of saving people money and identifying comparative products for a retail base. Few are using multiple services and adding the Open Banking API data within that.

The Next Phase of Open Banking

Open Banking currently resides in the technical world where process and methodology makes it work. This is crucial, I would refer to it as the mobilization stage. The next phase is much more interesting. The commercial teams will get much more involved in Open banking soon. Companies such as Funding Options, IWOCA, ESME and various lending platforms and brokers will begin to unlock the golden data that will become available.

The most valuable data is arguable, but I am going to say that its business cash flow data. Data such as knowing when they need to borrow, how much and what for… and most importantly telling them before the event. This is a gap for banks, lenders and brokers. They simply cannot see the business financial patterns unless a cash flow is up to date. This means the business must have strong financial skills and practice them!

The most valuable data is arguable, but I am going to say that its business cash flow data.

Open Banking enables a task that has troubled many businesses for many years. Cash flow is king, but the challenge is that cash flow starts at the bank. It has to, that’s where the money is. The challenge of making an accurate cash flow has for a long time been a disparate task from the bank account. Data was taken from the bank not aggregated as is now possible.

Many lenders look at the PL and SL as sources of data. That’s great if they are up to date. The challenge has always been keeping them up to date. The shoebox principal still stands, the purchase and sales ledger are only accurate if the shoebox has reached the accountant or bookkeeper.

Cash flow, bookkeeping and banking…together

Here at Slide that’s exactly what we are focusing on. That challenge of bringing cash flow, bookkeeping and banking all together in one place. We want accurate data for the business and the lender. The combination of the three has many benefits. The business gets skills and information to help their business survive and thrive. The lender gets foresight of cash events that drive their pipeline and more importantly before the lending event.

Find us at the NACFB Expo

The really cool bit about this is that we are doing it all within a banking app. Something every business uses every day. If you’re attending next week’s National Association of Commercial Finance Brokers (NACFB) Expo at Birmingham’s NEC, come and have a look (at Stand H02). We are changing the way business works.

Slide announced as exhibitor at the NACFB Commercial Finance Expo 2019

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