UK: Through open banking, CRIF is enhancing the creditworthiness of SMEs

By Puja Sharma

More UK small and medium-sized businesses (SMEs) will be able to get their invoices paid instantly, better manage their cash flow and improve their overall creditworthiness.

The innovation has been made possible through a new partnership, combining invoice finance provider Penny’s instant payment services with CRIF’s market-leading credit scoring solution. The collaboration draws on CRIF’s expertise as a global leader in open banking solutions to bring its full power to the world of invoice financing.

The UK’s small businesses are the backbone of the economy, but many have struggled during the challenging economic climate in recent years. Compounding this is the fact that some businesses are denied access to financial support when lenders are unable to build a clear, accurate picture of their finances – particularly if they haven’t been trading long.

Sara Costantini, Regional Director for the UK & Ireland at CRIF, said: “At CRIF, we want to solve that problem. That’s why we’ve partnered with Penny to bring the power of open banking to invoice financing, so more small businesses can get their invoices paid instantly, helping with cash flow while improving future creditworthiness”

There are 5.5 million SMEs in the UK, making up over 99% of all businesses. Together, they employ 16.3 million people with a turnover estimated at £2.3t. The partnership between CRIF and Penny comes as more businesses across the country face challenges due to the uncertain economic climate.

Penny’s invoice financing solution works by allowing a business to advance money against the amount due from their invoiced customers. The invoiced customer then pays Penny directly with terms typically over 30, 60, or 90 days. However, if a true picture of a small business’s financial situation is unavailable, this can lead to them being declined.

The new service utilizes CRIF’s Credit Passport, which uses open banking data to provide a real-time, secure way of speeding up the decision process for lenders and providing transparency and advice for SMEs on their creditworthiness.

Penny customers will be able to connect their business bank accounts, allowing an instant soft credit assessment via open banking. This approach gives a fuller, more accurate picture of a business’s finances than traditional types of credit scoring and reduces fraudulent applications by establishing a historical relationship with the invoice subject.

With data refreshed daily, businesses that may have previously been rejected due to a lack of credit information can now get their invoices paid instantly, with the decision process cut to less than 30 seconds and funds released within 24 hours. Utilising open banking in invoice financing in this way enables a clearer, more accurate picture of a business’s creditworthiness and allows for more informed, lower-risk lending decisions to be made. This innovation is expected to lead to more business applicants being accepted for loans through Penny.

 “For over 15 years, the UK’s 5.5 million SMEs have been systemically underserved by lenders and denied the finance products available to their corporate counterparts,” said Colin Gunnell, CEO of Penny.

“There is a huge portion of the SME market that is not able to access business finance products due to the inability of conventional funders to make real-time decisions. Penny and CRIF have both individually identified this as a universal problem in the UK which needs to be resolved, building sophisticated platforms to breach the funding disadvantage experienced by SMEs.” Gunnell added.

The announcement builds on previous work between CRIF and Penny to offer invoice financing to Credit Passport’s 30,000 registered SME customers, by allowing SMEs to access instant invoice financing directly through Penny’s services.

Key highlights

• Nearly one in three businesses said that they had experienced an increase in the late payment of invoices in the last three months of 2021.
• Almost 1 in 10 said late payments were now threatening the viability of their business.
• CRIF – the leading provider of credit information in Europe – has partnered with invoice financing provider Penny to enable more UK small businesses to get their invoices paid instantly.
• Service utilises open banking to enable better, more informed decisions on lending – reducing risk and fraud, helping manage cash flow, and improving creditworthiness.
• The partnership will help UK SMEs during difficult economic times to get invoices paid instantly, increasing the number of businesses accepted for finance through more accurate, reliable data.