FCA announces open finance SME push

The Financial Conduct Authority (FCA) is pushing ahead with plans to accelerate the wider adoption of open finance, and says it will prioritise exploring how the wider sharing of financial data can help SMEs improve access to credit and speed up loan applications.

David Geale, executive director for payments and digital finance at the FCA, said: “Open finance has the potential to transform how people interact with financial services.”

“By giving consumers and businesses more control over their own financial data, we can help them access credit, secure better deals and receive more customised support – while fuelling innovation, competition and supporting economic growth.”

To progress plans as quickly as possible, the FCA says it will engage with industry, consumer groups and fellow regulators in 2026 to develop a range of practical open finance use cases. This will be done through the FCA’s Smart Data Accelerator, which allows firms to test emerging technologies and use cases for open finance in a secure space. At the same time the FCA-led PRISM (Prioritisation and Real-world Insights Selection Matrix) Taskforce will create a clear, reusable framework for assessing the impact of open finance use cases.

Adam Jackson, chief strategy officer at Innovate Finance, said:

“Just as open banking has sparked the growth of many UK fintechs, so open finance can power a new wave of innovation. By unlocking high-quality data in a way that secures consumer trust, open finance can be a foundation for widespread adoption of agentic AI.”

‘We support collaboration between industry and the FCA to deliver the roadmap at pace, enabling agreement on priority use cases and datasets, and appropriate regulatory action to open these up to competition and innovation.’

Roadmap

The FCA says it will work with the Treasury on options for a regulatory framework for open finance by the end of 2027. It also intends to consult on its proposed long-term regulatory framework for open banking before the end of this year. Open banking, which allows individuals and businesses to share access to payments data from their bank account via trusted apps and services currently has approximately 17 million users, or nearly 1 in 3 adults in the UK.

In the meantime, the regulator says firms will be supported to introduce open finance products sooner where they are already able to access data and appropriate permissions are in place. According to the FCA’s open finance roadmap, firms will be encouraged to prioritise what it terms high-impact use cases, which include lending to SMEs. The regulator’s role will be to help build robust evidence through sprints and structured experiments, testing what works in practice and where barriers remain, as well as working closely with industry, consumer groups and the government to assess delivery models, incentives and the role of industry-led solutions.

The FCA’s approach has been welcomed by Nicole Sandler, Head of Corporate and Regulatory Affairs, Centre for Finance, Innovation and Technology (CFIT), a coalition of leaders from finance, technology, academia and regulators. “A coherent, cross-sector and intra-governmental approach is crucial if we are to jump beyond the comparatively narrow scope of open banking.”

“While that has been an undoubted success, becoming the model for UK smart data schemes to emulate, our ambitions with open finance are to enable secure, seamless sharing of all the data that comprises the financial lives of businesses and individuals,” Sandler maintained.

Barriers

The FCA points to research from McKinsey suggesting open finance could generate up to 1%-1.5% of UK GDP by 2030, while a study from Open Banking Ltd and EY indicated the economic impact of open banking and open finance combined could reach £7.4 billion per year in five years.

The first business case in the FCA roadmap looks at how open finance could support a SME to source a business loan. The SME had previously been rejected for failing to demonstrate adequate cashflow; a fintech using open finance could pull together a better picture of the cashflow by using wider transaction data and could also advise on way to improve the company’s credit profile.

Despite the potential benefits, which are wider than those offered by open banking, the FCA acknowledges that there are barriers to unlocking open finance. They include consumer data-sharing and privacy concerns, business uncertainty over costs and liability, and fragmented regulatory oversight. Other factors are the lack of a clear incentive for firms to engage in open finance and imbalanced data access across the ecosystem.

In addition, the FCA highlights concerns around systemic risks to network resilience; latency and cost and the lack of investment in shared infrastructure that would support interoperability, oversight and long-term adoption.