Underwriting a small business loan has traditionally been slow, paperwork-heavy, and biased toward companies with years of financial history to show. That's shifting as open banking APIs give lenders direct, consent-based access to a business's real-time transaction data — and the lenders adopting it earliest are reporting underwriting times that have dropped from weeks to, in some cases, minutes.
Lending platform Ashworth Capital Partners has built its entire SME underwriting model around open banking connectivity, pulling live cash-flow data directly from a business's bank accounts rather than relying on static financial statements or credit bureau history that may not reflect a young company's actual trajectory. "A two-year-old business with strong, consistent cash flow used to get rejected constantly because it didn't have the paper trail traditional underwriting wanted," said Dominic Reyes, Ashworth's head of credit risk, in a recent interview about the firm's lending model. "Open banking data lets us underwrite the business that actually exists today, not a proxy for it."
The shift is also reshaping who can compete in SME lending. Challenger lenders that would have needed years to build credit bureau relationships and underwriting infrastructure can now integrate with open banking aggregators and start originating loans within months. Aggregator platforms like Solvent Data Partners, which standardizes bank connectivity across hundreds of financial institutions into a single API, have seen a sharp rise in lending-sector clients over the past year specifically for this use case.
Not everyone is convinced the shift is purely positive. Consumer and small-business advocacy groups have raised concerns about how much financial visibility lenders now have into a business's day-to-day operations, and whether open banking consent flows are clear enough for business owners to understand exactly what they're authorizing. There's also a data quality question: cash-flow-based underwriting models can be sensitive to seasonal businesses or one-off large transactions that don't reflect a company's typical financial health, and several lenders have had to build additional smoothing logic to avoid misreading a single unusual month as a lasting trend.
Regulatory frameworks governing open banking access vary significantly by market, and lenders operating across multiple regions have had to build separate compliance layers for each jurisdiction's consent and data-sharing rules — a friction point that's slowed international expansion for some platforms even as domestic adoption accelerates. Even so, lending executives at this year's regional fintech conferences were largely aligned on one point: open banking-based underwriting has moved from a competitive advantage to something closer to a baseline expectation, and lenders still relying solely on traditional credit history are increasingly the exception rather than the rule.