BoE to help launch open platform for SME lending

During a speech at the Mansion House yesterday, Carney said artificial intelligence and machine learning techniques have the "potential to yield enormous benefits" for businesses by opening up new lines of credit, providing greater choice, better-targeted products and keener pricing.

Carney added that putting this data to work is "critical to closing one of the biggest funding gaps in the country".

Research shows that SMEs face a £22bn funding gap and almost half of all SMEs don’t plan to use external finance, citing the hassle or time associated with applying. Of those that have approached their bank, two fifths have been rejected.

Citing problems, Carney highlighted that the assets SMEs are seeking to borrow against are increasingly intangible – the value of a brand or user base – rather than physical assets, like building or machinery.

Additionally, SMEs that have not borrowed lack the historic data required for credit scoring and legal requirements to prevent money laundering and “Know Your Customer” make the process "especially burdensome for a small business with limited resources".

The Bank of England believes lenders should be able to access a broader set of information on which to base credit decisions and Carney said that an open platform for SME lending would enable open banking and empower SMEs.

Citing the benefits, Carney said the platform would enable providers of finance to compete for SME lending, helping to broaden the products available to companies and offer more competitive rates, making access to finance quick, easy and cost effective.

Concluding, Carney said: "It is not for the Bank of England to build this platform but we can help lay some of groundwork.

"The Bank will submit a formal response on how to develop an open platform for competitive SME finance."