BrazilDigital banks and open finance are transforming the lending landscape
The world of financing is evolving, with digital banks and open finance leading the charge in the competitive lending landscape, writes Raid Abdulmajeed, Founder & Head of Advisory at ClarixConsult.
With open finance, lenders can access a wider range of real-time financial data, enabling them to move beyond traditional credit evaluations. This shift is making lending more accessible, efficient, and inclusive, especially for micro, small and medium-sized companies (MSMEs) and startups that often face challenges in securing loans through traditional methods.
Open banking primarily focuses on sharing payment data from bank accounts, but open finance extends this by including a wider range of financial data, such as income received from non-bank sources like STC Pay, cash flows investments, mortgages, loans, and insurance. This expanded access to financial data creates a more competitive market, offering better financial products and services to both consumers and MSMEs.
Lenders can create customized lending products tailored to each customer unique financial situation. Whether it’s adjusting loan rates or offering flexible repayment options, open finance also enables lenders to create more tailored approach and methodology ensuring that lending meets the specific customer needs.
Saudi Arabia MSMEs empowerment
Saudi Arabia is embracing this financial transformation with a regulated open banking framework that is already in place. The next step is the development of an open finance framework that will further support the growth of MSMEs, helping them contribute even more to the Kingdom’s GDP in alignment with Vision 2030.
Further reading: Open banking can transform payments scene in Saudi Arabia.
Digital banks in Saudi Arabia will began to adopt open finance practices, by offering MSMEs faster loan approvals, more personalized loan products, and greater financial flexibility. This shift toward real-time, data-driven lending will not only help businesses grow but also create new opportunities for financing across various sectors.
More lending options than before
One of the most significant benefits of open finance is that it makes lending easier and faster for MSMEs and startups. lenders can assess creditworthiness more accurately, enabling quicker loan approvals, by linking financial data directly to MSMEs records offering customized loan options – everything from salary financing, Receivables, working capital to flexible, interest-adjusted loans – tailored to the financial health and needs of the business.
The shift from open banking to open finance is a game-changer for MSMEs and startups. With enhanced data sharing MSMEs and consumers will have easier access to finance their needs.
