The impact of open banking on small business financing



Open banking, powered by application programming interfaces (apis), is reshaping the financial industry and has far-reaching implications for small businesses. One of the most significant transformations is in small business financing, including access to credit and loan management. In this article, we will delve into how open banking is revolutionizing the landscape of small business financing, supported by relevant statistics and data from authoritative sources.

The small business financing landscape

1. Access to credit for small businesses:

Access to affordable credit has historically been a challenge for small businesses. Traditional banks often require extensive documentation and collateral, making it difficult for small businesses to secure loans.

– according to the small business administration (sba), nearly 30% of small business loan applications are denied by traditional banks.

2. High costs and administrative burden:

Small business owners often face high-interest rates and substantial administrative burdens when seeking financing from traditional lenders.

– a survey by the national small business association (nsba) found that 74% of small business owners felt that acquiring financing is more difficult than expected, and 68% considered the cost of financing to be unreasonable.

The impact of open banking on small business financing

1. Enhanced access to financial data:

Open banking allows small businesses to share their financial data securely with third-party lenders, providing a more comprehensive view of their financial health.

– according to a study by deloitte, 80% of small businesses believe that sharing financial data through open banking can help them access financing more easily.

2. Alternative credit scoring models:

Open banking enables the use of alternative credit scoring models that consider a broader range of data, such as transaction history and cash flow.

– a report by the world economic forum (wef) states that alternative data-driven credit scoring models can help bridge the financing gap for small businesses.

3. Faster loan approvals:

The streamlined access to financial data through open banking accelerates the loan approval process, reducing the time small businesses have to wait for funding.

– according to a survey by the federal reserve banks, 33% of small businesses experienced challenges with the speed of traditional bank loan applications.

4. Lower costs and competitive rates:

Open banking promotes competition among lenders, leading to more competitive interest rates and lower financing costs for small businesses.

– a report by accenture suggests that open banking can lead to an overall reduction in the cost of financing for small businesses by creating a more competitive lending environment.

5. Improved loan management:

Open banking not only facilitates loan origination but also simplifies loan management by providing real-time access to financial data, enabling better repayment planning.

– the federal reserve banks’ survey found that 30% of small businesses face challenges related to loan management, which open banking can help address.

6. Reduced administrative burden:

Small businesses can reduce administrative overhead by allowing lenders to access their financial data directly, eliminating the need for extensive paperwork.

– a study by the u.S. Chamber of commerce highlights that reducing administrative burdens associated with loan applications is a key benefit of open banking.


Open banking is a game-changer in the realm of small business financing. By providing enhanced access to financial data, enabling alternative credit scoring models, expediting loan approvals, reducing financing costs, improving loan management, and lowering administrative burdens, open banking addresses many of the challenges small businesses face when seeking financing. As open banking continues to gain momentum, it is poised to revolutionize the financing landscape further, making it easier for small businesses to access the credit they need to grow and thrive. This transformation not only benefits small business owners but also fosters economic growth and innovation in the broader business ecosystem.