UK SME Lender Funding Circle Is Reevaluating whether to Leverage Open Banking to Improve Customer Experience

Funding Circle lobbyFunding Circle (LSE: FCH), an SME lender that facilitates loans in both the US and parts of Europe, says it’s reevaluating whether it should begin leveraging Open Banking technology.

The company claims that it has managed to improve its customer experience, and would now like to reconsider adopting open banking software and solutions. Open Banking requires major banks to share “anonymized” customer data with third-party financial services providers (after obtaining consent from the data owners).

At present, the peer to peer (P2P) SME lending platform claims that it isn’t using any type of data-sharing platforms or technologies.

Lisa Jacobs, MD at UK-based Funding Circle, confirmed that the small business lender had previously  looked into using Open Banking, in order to support its credit assessment processes. However, the company decided not to leverage the data-sharing option, because it was not sure if the financial information obtained via the process would be reliable or accurate.

Jacobs tells Peer2Peer Finance that she “loves” Open Banking and thinks it’s “great.” Jacobs points out that when the technology was first launched, she knew or realized it may take awhile before it actually became useful. Funding Circle now believes that Open Banking may have matured enough for the company to consider adopting, Jacobs said.

She noted that they had concerns about the coverage and accuracy of data obtained via Open Banking. The company also wanted to ensure that the customer experience was not negatively affected by adopting the technology.

Jacobs claims that the user experience was “horrible” when Open Banking was first introduced. But she believes it has improved dramatically and now it might offer “more opportunities than ever before .”

Open Banking was officially introduced back in January 2018, but adoption has not been as fast as initially expected, because of concerns regarding data privacy.

Instead of using Open Banking, Funding Circle obtains the data it requires via regular bank statements or the Commercial Credit Data Sharing (CCDS) project.

CCDS is a UK government initiative that aims to encourage competition in the country’s SME lending markets. The CCDS project requires the UK’s nine largest banks and three credit reference agencies to share credit related data that they keep on file about SMEs. This data may be shared after obtaining consent from SMEs, and may include businesses’ current account information and their status on any loans they may have taken.

Other European Fintech sector professionals have also shared their views on Open Banking.

Andréa Toucinho, the Director of Studies, Prospective and Training of Partelya Consulting and Country Ambassador for France of European Women Payments Network (EWPN), stated in June 2020 that it’s necessary to develop a European vision or roadmap for adopting Open Banking and Open Finance platforms.

She suggests that European countries need to harmonize their different approaches to Open Banking. She recommends standardizing relevant APIs at the European level.

Other European Fintech firms are also seriously looking into leveraging Open Banking to streamline their operations. Digital bank Revolut recently teamed up with TrueLayer to provide Open Banking features in Italy.

Nuapay is now connected with 55 banks operating in France connecting 190 million French bank accounts. Nuapay’s French merchants will now be able to accept instant payments via Open Banking from customers, according to a company release.

Cloud Connectivity Company Kong is now powering Xinja Bank’s digital banking platform.

Open Banking can give lenders an “extremely accurate” and detailed view of a consumer’s finances, according to an industry professional.

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