The Future of Small Business Lending with Open Banking by Charles Groome (Biz2Credit)

The Future of Small Business Lending with Open Banking – Bridging the $750 Billion Funding Gap
Charles Groome, Vice President of Growth Strategy at Biz2Credit

apidays New York 2025
API Management for Surfing the Next Innovation Waves: GenAI and Open Banking
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Transcript

1. The Future of Small Business Lending with Open Banking O P E N F I N I T Y 2 0 2 5 Bridging the $750 Billion Funding Gap
2. 2 Charles Groome VP of Growth Strategy & Operations Charles Groome is the Vice President of Growth Strategy & Operations at Biz2Credit and Biz2X, a leading FinTech company that has facilitated over $8 billion in funding for U.S. small businesses, serving over 250,000 clients. Marketer, #GirlDad, PPP Survivor
3. Solving Small Business’s Biggest Financial Challenge ESTIMATE D FUNDING GAP FOR US SMALL BUSINESSES 59% of SMB have unmet financing needs $750B of small business owners concerned about capital access for operation & growth 77% 70% of small business owners worry about inflation's impact on their business Sources: BCG & Biz2X Report, January 2025 | Mastercard Proprietary Research, May 2023 | Goldman Sachs, 10,000 Small Business Voices, May 2023
4. 4 Decoding the legacy issues in SMB lending K E Y C H A L L E N G E S P E R C E P T I O N O F H I G H E R R I S K Traditional banks view small businesses as inherently risky due to high failure rates and volatile cash flows. 1 B A N K I N G R E G U L A T O R Y C H A N G E S 2 L A C K O F D I G I T I Z A T I O N 3 R E L I A N C E O N O U T D A T E D A S S E S S M E N T 4 Digitized retail banking has outpaced analog SMB lending, creating a five-year functionality gap. Inefficient technology and outdated credit evaluation methods make small business lending costly and inefficient. Post-crisis regulations cut small business lending from 23% to 18% of bank C&I portfolios.
5. 5 $1.7 trillion is the estimated size of the SMB lending market, with over $500 billion held on bank balance sheets. $350 to $750 billion is the estimated funding gap in the U.S. alone. Source: BCG & Biz2X Whitepaper; The forthcoming revolution in small business lending, January 2025 The Small business financing gap is large 45% larger The annual market could be as much as
6. 6 The challenge financial services have serving small businesses Source: BCG & Biz2X Whitepaper; The forthcoming revolution in small business lending, January 2025
7. 7 SMBs Are Not What They Used to Be H O W S M A L L B U S I N E S S H A S C H A N G E D 65% of SMBs would be happy to switch their existing platform for an improved embedded finance integration 77% are more likely to go through a credit application if it is fully online and instant approval is available 53% of SMBs prioritize fast access to funds, highlighting the strong demand for embedded capital features Sources: Mastercard Third-Party Research, May-June 2022 | Adyen/BCG Embedded Finance Report, 2022, Adyen | The best way to fast-track your embedded finance journey, 2024, of SMBs believe a frictionless digital experience is critical to the business 78%
8. 8 Open Banking as the Foundation for Change R e a l - T i m e F i n a n c i a l D a t a A c c e s s ( w i t h P e r m i s s i o n ) Instant access to bank data enables faster, smarter credit decisions. R e d u c e d D o c u m e n t a t i o n B u r d e n Eliminates PDFs and paperwork, streamlining applications and approvals. C o m p r e h e n s i v e V i e w o f B u s i n e s s H e a l t h Connected systems deliver an end-to-end view of financial standing. O P E N B A N K I N G & S M B L E N D I N G
9. 9 Lending Transformed Digitally A B O U T T H E P L A T F O R M The Biz2X Platform offers enhanced loan management, servicing, risk analytics and a configurable customer journey, Biz2X is helping lenders run their lending operations at scale. E A S Y - T O - U S E L O A N A P P L I C A T I O N Works on any device and for any kind of small business customer. B A N K E R D A S H B O A R D S Give your bankers the capabilities they need to make smarter business loans. C R E D I T A N A L Y T I C S T O O L S U I T E Financial insights tailored to small businesses, in the hands of your credit team.
10. 10 Biz2X Automated Analysis B U I L D W I T H O P E N B A N K I N G I N M I N D Automatically extracts and charts critical cash flow information. Visua liza tions ove r tim e : # of De p osits # of Withd ra wa ls # of NSFs Top 5 De p osits Top 5 Withd ra wa ls Ca te g orize d tra nsa c tions IMPORT CLIENT BANK STATEMENTS Op e n Ba nking Conne c tion Extract the financial and cash flow insights that lenders and other financial solution providers need to qualify the small business for appropriate financial services. Decrease risk at the same time that you expand access to financial products via real-time insights and automated always- on analysis through Open Banking. Multiple Open Banking gateways used across markets. O P E N B A N K I N G I N A C T I O N
11. 11 Advanced ML-driven SME Scorecard O P E N B A N K I N G E N A B L E D Features from personal & business bureau reports, such as credit score, inquiry count, past due amount etc. Features based on applicant’s business, such as industry, time in business and channel of origination. Cash flow features from automatic extraction & classification of bank transactions e.g. DSCR, monthly deposits etc. Outstanding balance of prior loans, payment behavior etc. Debt related features from bank statements, such as new debt in last 3 months, leverage ratio etc. 0 100 49 Debt / Stacking ML techniques used to optimize model performance Past Loan Performance Business Cash Flow Firmographic Credit Bureau
12. Q&A O P E N F I N I T Y 2 0 2 5
13. The Future of Small Business Lending with Open Banking O P E N F I N I T Y 2 0 2 5 Bridging the $750 Billion Funding Gap