Open Banking
A regulatory framework allowing businesses and individuals to share their bank account data securely with authorised third parties, including lenders.
Open banking was introduced in the UK by the Competition and Markets Authority (CMA) and the FCA in 2018, requiring the nine largest UK banks to allow customers to share their account data with authorised third parties via secure APIs. For business finance, open banking enables lenders to access real-time bank transaction data with the applicant's consent.
Open banking has significantly accelerated SME lending decisions. Rather than manually uploading bank statements for underwriting, a business can share 12-24 months of transaction data securely and instantly. Lenders use this data to assess turnover, cash flow patterns, seasonality, existing loan obligations, and spending habits.
Most major fintech lenders (Iwoca, Funding Circle, Tide, and others) now use open banking as a standard part of their underwriting process. For applications through Spark Finance, open banking connectivity is available and can speed up the decision process significantly. Data shared via open banking is encrypted and access is time-limited.
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