Data Sharing Scheme Designed to Boost Funding for SMEs

The government has launched a new small and medium size business (SME) credit data sharing scheme, designed to make it easier for new banks and alternative finance providers to check credit worthiness of potential business customers.

The scheme, governed by the new Credit Information Regulations, will make it easier for new challenger banks and alternative finance providers to check credit worthiness of potential business customers, increasing the number of funding options open to SMEs and helping more businesses find the funding they need to grow.

Under the scheme nine banks and three Credit Reference Agencies have been instructed to share, with the SME’s permission, the credit information they hold on SMEs equally with all finance providers.

The following banks have been instructed to share their data with Experian, Equifax and Creditsafe (the CRAs).

·         RBS

·         Lloyds

·         HSBC

·         Barclays

·         Santander

·         Clydesdale & Yorkshire Bank

·         Bank of Ireland

·         Danske Bank

·         First Trust Bank

The CRAs must then share this data equally with all finance providers.

A number of bodies, including the Office of Fair Trading and the Competition Commission, have all highlighted how a lack of information about the creditworthiness of SMEs has been a major barrier to competition in the SME lending market. The biggest banks currently have access to much more data than challengers and the new regulations will enable over 100 alternative finance providers to compete effectively in the SME lending market. SMEs are vital to the UK economy, accounting for over half of private sector employment and nearly half of all private sector turnover. The ability of SMEs to access finance is important for funding business investment, ensuring businesses reach their growth potential, and for facilitating new business start-ups.

Harriett Baldwin, the Economic Secretary to the Treasury, said:

“The government is determined to encourage a competitive banking system that supports growth and creates jobs.

Small businesses are the backbone of Britain’s economy and it is right we make every possible source of finance available to them.

The best way to deliver this is to increase competition in the banking sector and remove the barriers to new sources of finance for SMEs. Requiring banks to share data is a major structural reform that will level the playing field between banks and alternative finance providers.

The government expects data sharing to begin later this year when tests between banks and CRAs confirm that data can be shared accurately and securely.”