Digital small business lending pioneer iwoca has connected leading banks Barclays and HSBC to its platform through Open Banking.
The finance company now has connections to three of country’s largest banks after it completed the first ground-breaking agreement with Lloyds Bank in November.
As a result of the expansion, 60% of iwoca’s customers can now make use of Open Banking services, under which customers can give verified third-parties secure access to their bank data to speed up the lending process.
Business owners that bank with either Barclays, HSBC or Lloyds can provide up to five years of transaction history in seconds when applying for a revolving credit facility or long-term loan from iwoca, which substantially reduces approval times.
According to the Competition & Markets Authority (CMA), the three connected banks combined account for between 50-80% of the market share of UK business current accounts.
The next challenge is encouraging the use of Open Banking, with recent research among 1,000 small business owners revealing that 73% could not correctly identify what Open Banking is.
However, there is evidence that pioneers in the SME sector are willing to take the first step towards digitalisation, including a beauty salon in Kent that became the first to apply for a loan in the UK using Open Banking. It provided iwoca with transaction history digitally during an application process that secured funds in under two hours.
Executives at iwoca say they are continuing to work on finalising connections with the remaining six high street banks, as it has been working closely with all nine leading banks since the launch of Open Banking in January 2018.
Connections to Santander and NatWest are close to being completed, it says.
Christoph Rieche, CEO and co-founder of iwoca (pictured), said: “I’m delighted that we can now offer almost two-thirds of our customers an easier way to get approved with us. Clearly there’s a need to raise awareness of Open Banking and help small business owners benefit from it, and we’d love to work with the banks and the Open Banking body to achieve that.
“We want to make getting a small business loan from iwoca as simple as booking a plane ticket online. Open Banking is helping us to achieve that.”
Mark Chidley, independent SME representative to the Open Banking Implementation Entity (OBIE), said that iwoca’s announcement demonstrated the potential of Open Banking to transform how small businesses manage their finances.
He added: “Open Banking has a powerful role to play in bringing together members of its ecosystem to provide small businesses with the ability to manage their businesses in a more productive, efficient and profitable way – helping to mitigate persistent challenges such as late payments, low productivity and inefficient access to credit.”
iwoca provides loans of up to £200,000 to small and micro businesses across the UK, Germany and Poland via its website and through partner integrations. Since launching in 2012, it has lent more than £550 million to over 21,500 European businesses, with 70% of its lending decisions automated.