Future Finance Outlook: Regulatory Changes on the Horizon

The next wave of regulatory reform is set to reshape SME lending, fintech innovation, and the competitive landscape across UK finance. While the full impact will unfold over several years, the direction of travel is already clear: stricter capital rules, tighter conduct standards, and more open data flows. Both SMEs and lenders will need to prepare early to stay ahead of these shifts.

1. Key Regulatory Changes Coming Up

Basel 3.1 – Higher, More Risk-Sensitive Capital Requirements

The UK’s implementation of Basel 3.1 will reinforce capital adequacy obligations for banks, with changes to risk-weighted asset calculations and constraints on the use of internal models. For SME lending, this could mean:

• Higher capital charges for certain unsecured or higher-risk segments
• More conservative pricing models
• A re-evaluation of product mix, particularly for longer-tenor loans

Basel 3.1 won’t derail lending, but it will raise the cost of capital for traditional banks — indirectly affecting pricing and risk appetite.

Consumer Duty Extensions – Fair Value & Transparency for Business Finance

The FCA’s Consumer Duty framework is increasingly influencing business-facing products, especially micro- and small-enterprise finance where consumer-style protections are being discussed or adopted.

Key implications:

• Tighter expectations on fair value, disclosure and transparency
• More scrutiny of pricing structures, fees, and product suitability
• Pressure on lenders to demonstrate robust, outcomes-based processes

The result is a likely convergence between consumer lending conduct standards and the SME market — reshaping product design and communication.

Open Finance Legislation – Unlocking Data Portability & Cross-Platform Access

The next phase of Open Finance aims to expand data sharing beyond bank accounts to include loans, insurance, pensions, receivables and more.

For the SME lending ecosystem, this means:

• Greater borrower control and portability of credit, financial and performance data
• Faster, richer underwriting inputs for lenders
• A more level playing field for fintechs that rely on alternative data sources
• A natural push towards embedded finance and automated credit assessment

In short, Open Finance will act as both a transparency enhancer and a competition accelerator.

2. Expected Impacts Across the Market

Higher Compliance Costs

Banks and lenders — especially smaller firms — face greater operational and regulatory overhead. This may accelerate consolidation or strategic partnerships in the market.

More Scrutiny of SME Loan Products

Risk-based pricing, value assessments, product clarity, and post-sale support will come under increasing regulatory lens. Lenders will need stronger governance frameworks.

Stronger Borrower Rights

With expanded data access, SMEs will be able to compare options more effectively, port their financial histories between providers, and benefit from improved competition.

3. Preparing for the Next Phase

Both SMEs and lenders should view these shifts not as compliance burdens but as strategic opportunities:

• SMEs can leverage improved data access to secure better terms, faster approvals, and more competitive finance.
• Lenders that adapt early — through upgraded systems, clearer product design and data-rich underwriting — will be well-positioned to win in a more transparent, regulated environment.

The Bottom Line

The regulatory horizon is moving toward safer, more transparent, more data-driven finance. Those who prepare early will unlock the upside — lower friction, more competition, and smarter credit decisioning.

Contact us to learn how your business can stay ahead of these changes and secure the finance you need.