The UK government has announced a new industry-led taskforce to explore the future of open finance and its use to improve smaller companies' access to credit.
The taskforce aims to identify what datasets and new application programming interfaces would be more useful to support finance requests by small and medium-sized enterprises.
Chaired by the Centre for Finance, Innovation and Technology, the Open Finance Taskforce has until June 2024 to discover use cases for open finance and provide its recommendations to the government.
Announced this week at the Innovate Finance Global Summit, its establishment advances a number of the key recommendations set out by CFIT in its Blueprint Report published in February 2024 as the priority next steps for driving forward the open finance agenda.
Future entities should then be able to take forward the taskforce’s work by implementing APIs, unlocking proposed use cases, and setting out future standards for open finance internationally, said Ezechi Britton, CFIT’s CEO. Its work is already underway, he added.
The taskforce will identify commercially viable approaches to incentivise businesses to securely share their financial data, before considering appropriate next steps towards implementing any agreed recommendations.
It will operate through two key working streams: one looking specifically at data and API prioritisation, the other on potential commercial models, Britton said.
Developing proofs of concept has been “absolutely core” to informing what the taskforce must be focused on when it comes to exploring data, use cases and APIs. This week, CFIT has announced two trial initiatives building on the PoCs developed by its industry-wide coalition.
The initiatives, run in collaboration with leading retail banks, credit agencies, fintech firms and Citizens Advice, will scale two of the key PoCs established in CFIT’s Blueprint Report and serve as a precursor to the broader adoption of open finance nationwide.
Lenders will design and implement open finance solutions to accelerate SME credit assessment and loan decision-making, building on the finding that accessing new datasets and auto-populating business loan applications can lead to a significant boost in lending decisions.
PoCs already built by CFIT’s industry-wide coalition with Citizens Advice and HSBC were designed to demonstrate the real-world impact of open finance on vulnerable consumers and on increasing SME lending volumes.
The industry-wide coalition includes “Barclays and a number of other banks” which are “continuing to explore datasets and the impact of credit decisioning”, Britton said.
Will Turner, head of strategic growth, partnership and innovation at HSBC UK, told The Banker that work to date highlights how collaboration between the public and private sectors can unlock barriers to growth for financial technology.
“The PoC demonstrates that using open finance data can lead to faster and easier access to credit, with a significantly higher number of SMEs receiving a positive decision when applying for credit, and a reduction in the number of SME businesses who do not complete the application journey,” Turner said.
It could have a positive impact on the wider UK economy, he added, potentially “boost[ing] UK [gross domestic product] by up to £30.5bn, if SMEs have the ability to share currently inaccessible datasets with financial services firms under the CFIT consent framework”.
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Broadly, Turner said medium-term success would see streamlined access to HM Revenue & Customs and Companies House data being used in lending decisions, leading to a significant increase in access to lending for UK SMEs.
“We are actively engaged with furthering the recommendations made by CFIT, and for example HSBC UK is proud to contribute thought leadership to [the] new taskforce announced by the economic secretary at [the summit],” he added.
Once the taskforce has achieved its “core output” of providing key recommendations on data prioritisation and determining what APIs and potential commercial models could look like, the UK Treasury can take actions forward and “lay the foundations of secondary legislation on open finance, [which is] absolutely critical,” Britton said.
Success requires the taskforce to work “very quickly over the coming months and with a regular cadence of meetings” to build momentum and drive its mission forward, Britton said.
“We [the UK] should be taking the lead on open finance, setting international standards and exporting expertise … [and] building a global digital economy,” he added.
