The Centre for Finance, Innovation and Technology (CFIT), along with its partners, has set out how its new coalition intends to address the UK’s SME credit gap through the development of technology-driven solutions.
The sector-wide initiative, which is being supported by partners including Mastercard, Lloyds Banking Group, and HSBC, will explore how commercial credit data is shared and utilised, with a focus on the five million businesses in the UK with between three to 50 employees, particularly those in what it called “economically challenged regions”.
The coalition will look at using alternative data sources, enabled by technologies such as Open Finance, to develop and build “smarter” lending models that provide both SMEs and lenders with better insights into their financial health, and to encourage small businesses that lack confidence to apply for funding.
It comes after a recent study by the British Business Bank found that 60% of SMEs who do not seek finance are unaware of the options available to them, while research from Small Business Economics showed that 72% have been deterred from applying for finance again after a previous rejection.
Loan application data, including credit information, will be overlaid with alternative transactional data, such as cash flow, income, payment history, spending patterns and business performance over time.
CFIT said that the additional data will be used to assess whether rejected applications could have been approved under different circumstances, collating all the key data points on a ‘dashboard’, to provide SMEs with a holistic view of the factors that influence a lender’s credit decision.
The coalition will also undertake regional analysis to identify the areas where there are opportunities to improve access to credit, and will publish “constructive” policy recommendations for the government.
Leon Ifayemi, director of coalitions and research, CFIT
CFIT’s director of coalitions and research, Leon Ifayemi, said: “CFIT’s inaugural Coalition demonstrated how data sharing can help banks to make more lending decisions, faster.
“Now, alongside our industry partners, we’re shifting our focus from the supply side of SME lending to look at how we can boost demand for finance by helping small businesses to better understand their creditworthiness, overcome a fear of finance and apply for the funding they need with confidence.”
This Coalition will build on CFIT’s Open Finance coalition and SME Finance Taskforce.
“We’re pleased to be working with CFIT and industry partners to turn traditional and alternative data into user-friendly tools that will give smaller businesses the confidence to apply for funding,” added Angelene Woodland, chief customer officer at British Business Bank.
Elyn Corfield, chief executive officer of business and commercial banking at Lloyds Banking Group, said: “We know the critical role SMEs play in driving economic growth. Innovation in Open Banking data has unlocked better short-term borrowing options, but we want to lend more to more businesses.
“This is a real opportunity to get more financing into the hands of SMEs by improving their understanding of their own financial data, eligibility for credit and why a loan has been declined so they can reapply in the future.”
At the start of the year, CFIT announced its shift to a “hybrid model”, under which it will simultaneously run publicly and privately-funded coalitions, as it continues to diversify its revenue sources throughout 2025 and beyond.
