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Nucleus Commercial Finance: How Open Banking Is Transforming SMEs Financial Lives

At Nucleus Commercial Finance the business is currently reporting a 90-95% opt-in rate from their users to Open Banking functionalities. This allows the user’s various financial accounts data to be aggregated within Nucleus’ proprietary user portal and is taking place at a time when businesses are demanding a holistic view of their finances in order to help them navigate through the challenging business environment. Here Chirag Shah, CEO, explains how Open Banking will transform the alternative lending space for SMEs.

A willingness to embrace this digital connectivity is still relatively new to the SME ecosystem. However, Open Banking is changing the face of how people interact with their finances. While the most visible impact thus far has been within the retail banking space, the individual use case is just the beginning – and we are likely to see valuable use cases emerging and maturing across the sector over the coming years. One especially exciting frontier is SME finance.

Open Banking enables two distinct services: Aggregated Information Services Providers (or AISPs), which can pull in a user’s full financial data; and Payment Initiation Service Providers (PISPs) which authorize direct ‘push’ payments, from the user’s bank account straight into a merchants’ account. We have seen Open Banking products proliferate in the retail banking sphere: from finance management apps, which allow you to monitor your spending to savings apps, which round up your spending and squirrel away the excess automatically.

This Open Banking-enabled push for better, more informed financial health extends far beyond individual, retail finance – it will also drive stronger support for the financing needs of the UK’s SME landscape.

Open Banking can open doors for SMEs

The saying goes that knowledge is power – and this is especially true when it comes to financing. For SMEs seeking financing, the ability to see and show the whole financial story of your business is crucial. Many SMEs simply don’t have a team to run the loan application process – meaning much of the nuance of their financial life could be lost when applying the old-fashioned way. Open Banking means SMEs can get a holistic view of – and properly represent – their business model and financial performance, which could drive access to more sophisticated and tailored loan products, designed specifically to fit their needs.

The AISPs of Open Banking lend themselves well to a ‘dashboard’ style overview of the user’s finances – able to capture and present an SME’s full financial data. This can then be used to identify potential efficiencies and opportunities in their own balance books – a functionality which has traditionally only been available to much larger companies willing to invest in it.

AISPs and PISPs are back-end technologies, so how these services are delivered is down to the permissioned financial service provider. The front-end – which the user interacts with – is an API (application programme interface), the design and functionality of which can vary. This can empower SMEs to make decisions on their financial services providers based on value-adds such as API capabilities – giving UK SMEs more options when shopping for products and partners.

Combined with a more holistic view of their finances, this means that SMEs will be able to ‘shop around’ for better deals on their financial products and services. Moreover, thanks to Open Banking, the application process which precedes ‘shopping around’ only needs to be filled in once – an enormous time saving compared to traditionally filling in an application for every prospective provider. With the administrative burden of traditional loan processes reduced, SMEs will have more time for better informed strategic decision-making, and for focusing on adding value across the business.

The road ahead

For SMEs, Open Banking represents an exciting opportunity. Finance providers taking this tech-forward approach to deliver sophisticated, hands-off services save the SME from the human timespend of digging through bank statements, or the stress of locating a misplaced statement. This will enable finance providers across the UK to become truly strategic partners to the SMEs they serve.

Developing and deploying truly helpful Open Banking functionality will require providers to take a truly customer-centric view: accessibility and usability is vital. Since Open Banking is still relatively new to the SME landscape, it is how these value-adding services are delivered which tips the scales.

These are challenging times for UK SMEs, successful delivery of Open Banking functionality must go beyond providing the services alone. It is crucial that those deploying these services view themselves as educators as well as providers – to ensure their SME customers feel supported. Nucleus Commercial Finance has been pleased and proud to see 90-95% opt-in for our Open Banking services via our myNucleus portal – but our work in this area is just beginning.

Part of what makes Open Banking’s potential so powerful is connectivity: what happens when Open Banking is combined with process automation, or other digitally-enabled practices? This is why we are asking ourselves these questions when developing our digital products and services – taking a future-looking view of not just our part of the SME ecosystem, but the landscape as a whole. We want to stay abreast of these developments and trends, because only then will we begin to see how Open Banking could transform the financial lives of SMEs – equipping them with the tools they need to navigate the challenging short term, and thrive beyond.



  • Gina is a fintech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

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