A quiet revolution has reshaped how lenders look at businesses over the past few years, and most borrowers have barely noticed it happening. Open Banking — the framework that lets you securely share your bank-transaction data with a regulated third party, with your explicit permission — has changed the mechanics of lending decisions, often for the better. This is commentary on that shift: what Open Banking is, how it has altered underwriting, and the genuine benefits and limits it brings. We use it ourselves, so we will be specific about our own approach too.
What Open Banking is
Open Banking is a UK framework, underpinned by regulation and secure technical standards, that allows you to authorise a regulated provider to access specific bank-account information on your behalf. Crucially, it is consent-based and read-only for this purpose: you decide whether to connect, you can see what you are sharing, and access does not give anyone the ability to move your money. We explain the safeguards in plain terms in what Open Banking is and is it safe.
For lending, the relevant capability is straightforward. With your permission, a lender can see a recent, accurate picture of your business’s bank activity — money in, money out, balances over time — directly from the source, rather than relying solely on filed accounts or documents you assemble by hand.
How it changed underwriting
Before Open Banking, assessing a small business’s finances meant working from historical accounts, manually supplied bank statements, and credit-reference data — all of which are either dated, slow to gather, or both. A set of annual accounts can be many months old by the time it is filed. PDF statements have to be requested, sent and read. The whole process was sluggish and backward-looking.
Open Banking compresses that. A lender can assess current, granular transaction data in minutes rather than days, and base its view on what the business is actually doing now, not what it reported a year ago. That has three notable effects. Decisions get faster. Assessment becomes more current. And the dreaded thin file problem eases: a young business with little filed history can still demonstrate, through live transaction data, that it is trading healthily — something we discuss in why small-business loans are hard to get.
Why it can be fairer
There is a reasonable case that transaction-based assessment is not just faster but fairer. A backward-looking model can penalise a business for a thin file or a single bad patch in old accounts, missing the fact that it is trading well today. Live data lets a lender see the current reality — consistent income, managed outgoings, a business that is functioning — and judge on that basis.
It can also reduce reliance on proxies that correlate poorly with whether a specific business can actually afford a specific loan. Looking at real cash flow is, in principle, a more direct way to assess affordability than inference from incomplete records. We are careful not to overstate this — data can be misread, and no model is neutral — but the direction is genuinely towards assessment grounded in fact.
How we use it
We ask applicants to connect their business bank account through Open Banking as part of how we verify trading and assess affordability on the company — its turnover, bank-account history and business credit file — rather than on the director’s personal income. The connection is your choice and is made through the secure Open Banking process; we explain what happens, and what to do if you cannot connect, in our support articles and in how we lend. We also run a business credit check on the company and an identity check on the director, and we do not record the loan on the director’s personal consumer credit file.
The limits and the safeguards
Open Banking is a powerful tool, not a magic one, and honesty requires noting its limits. It shows what has happened in an account; it does not by itself explain the why behind every transaction, and good lending still involves judgement. It also depends entirely on consent and security: the value of the framework rests on data being shared deliberately, handled carefully, and protected properly. We treat the information accordingly, and you can read how we look after it on our privacy page. Used well, Open Banking makes lending faster, more current and arguably fairer. Used carelessly, it is just another source of data to misinterpret. The technology is only as good as the integrity of the lender applying it.