The Relationship Between Fintech and SMEs

July 19, 2021
Makayla Santino

Throughout the last decade, the fintech sector has found much success. Looking forward, the sector is expecting to achieve even higher amounts of success and become completely different than ever witnessed before in the upcoming decade. New regulatory initiatives like the Revised Payment Services Directive (PSD2) and Open Banking were introduced to encourage competition within the banking industry. These initiatives allow for smaller contenders to enter a market that has historically been overrun with large corporations. 

In practice, these initiatives have gone much further than simply opening a gap for smaller banks. These practices have resulted in a revolution in how small- and mid-size businesses (SMEs) are funded. Rather than hard capital as the most critical factor for the success of a fintech, data has become the most important aspect of any business.

Open Banking

Open banking is a vital element for the changes within fintech and how it interacts with small businesses. In short, open banking is the way APIs are utilized to free consumer finance data to third parties. These third parties are then able to form and disburse their own financial products to these customers.

Benefits to SMEs

SMEs are most definitely the actors that can benefit the most from open banking. With the traditional system of banking, SMEs tend to not be serviced adequately. One instance of SMEs not receiving the best service is that traditional banks have a narrow capacity to see the complete financial situation of an SME when it is holding capital over numerous institutions and instruments. In this way, the bank is lacking adequate information about the SME that would allow it to provide the best service to the company. These needs are met with open banking, because these systems account for a complete analysis of a SMEs financial position.

New Services

Due to these failures of the traditional system for SMEs, fintech startups are eager to service this wide category of customers. Open banking utilized by fintechs will allow third parties to view the full financial position of the SME and accurately access it for the very first time. Through the utilization of APIs, these services can occur and will have a significant impact on the method in which credit-worthiness is determined for SMEs. 

Another feature open banking will allow for is advanced peer comparison of data. Another benefit is that APIs would allow the SMEs to see real-time evaluation on their performance in their own market sector. 

SMEs will most definitely be inclined to pay fees for the above-mentioned services that would ultimately help their company grow. For this reason, open banking continues to be at the center of technology and the economy. The fintech sector is leading a banking revolution that will give SMEs the degree of service they should be entitled to for them to unlock their full potential in the economy.




Li, Lee. “With Open Banking On the Horizon, The Fintech-SME Love Story is Just Beginning.” TechCrunch, 16 July 2021,

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