ThinCats has become the latest lender aiming to capitalise on the benefits of open banking.
The alternative business lender has partnered with Salt Edge, a fintech firm offering open banking solutions, to improve the efficiency of its upfront credit assessment and ongoing loan monitoring processes.
It hopes to use open banking to detect earlier identification of changing circumstances or additional funding needs among its customers, and to use data aggregation for more effective portfolio monitoring.
“Considering the cashflow challenges that lockdown restrictions have caused, many businesses are struggling to receive additional funding. Using open banking data, lending companies can more accurately assess the cash flow needs of creditworthy borrowers and shape funding solutions specific to their needs,” said Gareth Rumsey, head of analytics at ThinCats.
“Given the high volume of cashflow backed loans that we fund, open banking has a key role to play in helping us support creditworthy, but asset-light businesses, so it was important for us to find the right partner. Salt Edge were able to provide a portal-based trial within days, which enabled us to test both the technical aspects of the service and the usefulness of outputs we could expect to see.”
Open banking allows high street banks to share anonymised customer data with approved third parties. The idea is that it encourages more competition and innovation in financial services, and gives consumers access to a wider range of financial products.
This could be crucial to businesses that are struggling with the coronavirus pandemic. It’s estimated 80 per cent of small and medium-sized businesses have seen revenue impacted this year due to the Covid crisis, according to a report from management consultancy McKinsey.
Other P2P lenders using open banking include Zopa, Growth Street and Ratesetter, which has recently been acquired by Metro Bank).