How SMEs benefit from data sharing regulations

In an effort to help open up the finance markets for small and medium sized businesses, the UK Government has made changes to current data sharing regulations. Mainly affecting the larger banks and credit reference agencies, the measures aim to make data sharing the norm, giving alternative finance providers and smaller, challenger banks access to much of the data acquired by bigger financiers. The move is expected to make it easier for SMEs to find the money necessary to grow, expand and succeed.

Perceived as one of the biggest obstacles to SME growth, the lack of information concerning the creditworthiness of smaller organisations has resulted in a difficult financial situation in which SMEs can struggle to borrow. With these changes, all of the designated banks and credit agencies will be required to provide, with the SME’s permission, the credit information they retain for a business. This information will be shared equally and without prejudice to all finance providers in the hope of introducing greater competition to finance markets.

For a considerable amount of time, many of the larger finance providers have been able to collect and analyse data that no other organisation has access to, in an effect becoming the only organisations able to provide capital to SMEs with ease. By opening up the market to smaller competitors, the UK Government hopes to grow the number, and increase the power, of alternative finance providers while also ensuring the bigger banks take a long look at their current SME services and improve on current offerings. Though the move will undoubtedly help smaller banks and alternative finance providers, it remains to be seen whether bigger banks will bow to governmental pressure and work more closely with SMEs.

The protocol for such data sharing still needs to be planned and tested and there are concerns about secure and accurate sharing, although these factors shouldn’t cause too many difficulties. At a time when the Government is banking on the support of SMEs and their owners, the policy, could help bolster their image as the party of business while also easing the pressure on small and medium sized businesses struggling to raise capital.

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