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Welcome to part three of our Q&A mini-series with some of the experts we interviewed in our recent Future of Banking Report.


Can you tell us about Swoop and how your platform is making it easier for SMEs to access financing?

CB: The basic premise of Swoop is to open up the funding market to SMEs. SMEs are very time poor and don’t have much time to find out what’s in the market or what they’re eligible for, and when you’re trying to apply for things you’re filling in endless forms and information without knowing whether or not you will get the cash. SMEs that want to use Swoop set up a free account and then integrate their data, which they can do in three ways—they can manually input their information, they can integrate with their accountancy platforms, or they can integrate their bank account via our Open Banking API. Once they have given us that data we’ll show their top line business information—what their turnover is, what their EBITDA is, what their debt service coverage ratio is—and educate them on some of the key stats and figures that funders are going to base their decisions on. Then we’ll show them what funding and cost-savings solutions are available. One of the reasons why the cost-savings element is quite important is because as a business makes savings, it improves their affordability ratios so they become more eligible for borrowing or become a better run business. Prior to this SMEs weren’t always aware of credit scoring or why their applications get rejected, so this improves transparency around why they can and can’t access certain funding. Before they would have just applied for everything under the sun and they didn’t know that was negatively affecting their credit rating, so this will help them better understand the scoring system and when is a good or bad time to apply for finance.

How will Open Banking change the way financial services are delivered to SMEs?

CB: Open Banking allows SMEs to take control of their data and access funding they probably had their eyes shut to. In addition, if multiple funders have that information available to them they can start to build products that better suit those businesses. For instance, a lot of SMEs use overdrafts when they need extra cash. That can actually be pretty expensive and they can easily build up quite a hefty bill. Whereas if they were to use their open data set and lenders could identify that they’ve got a couple of big receivables due from blue chip companies, they can unlock pretty healthy invoice finance facilities which they only have to pay for on a needs basis, so over the course of a 12-month period they will spend a lot less and be able to access a greater pool of capital. Foreign exchange is another massive one. We’ve seen that SMEs with turnovers of £100,000 or £120,000 were overspending in some cases up to £10,000 in FX fees by using their bank as their FX provider. This equates to a huge percentage of their overall turnover given over to banking fees. They can change that by opening up a new account with Revolut or switching to something like TorFX or Transferwise—there’s huge potential savings. SMEs on Swoop have also unlocked large savings across insurance, utilities, broadband and phone costs. On average we can help SMEs save £1,027 a year on utility bills and £425 on insurance. Once an SME’s Open Banking data is integrated, all of the available products and services are able to update in real time, so if an SME has a couple of good months or a year or whatever, the opportunity to refinance comes along a lot quicker.

How much do SMEs understand about the benefits of sharing their data through Open Banking?

CB: Probably one of the more unfortunate things about naming it Open Banking is that people think of it as something that is quite unsecure, so there is very much an education piece in terms of letting SMEs know what’s involved and reassuring them that it is secure. Customers need to know exactly what data they are giving way, what data they are granting access to, and what the benefits are. What we’ve found since having Open Banking on our platform is that two out of every 10 people on-boarding are integrating their bank account straight away, which is probably higher than we would have expected, and not surprisingly it’s more the younger, technology-based businesses that have no issues with sharing data for that kind of exchange. But traditional businesses that are more tech-adverse need more of an education and understanding about why they would potentially share data in an open system.

How are lenders responding to Open Banking?

CB: We’ve found them to be pretty positive, a lot of banks have really forward-thinking Open Banking teams in place. We’re doing a lot of work at the moment with RBS, Barclays and HSBC on how we can help make the ecosystem better. One of the big Irish banks is also white labelling our software to offer alternative lending at an earlier stage. Many big banks don’t do a lot of early-stage lending because it can be quite risky, and because of their large infrastructure their credit models won’t often allow them to lend at those early stages, so they end up rejecting a lot of applications. That can have a big impact on which businesses succeed and which businesses fail.

Click here to download the full report.