Mastercard Open Finance is transforming main street with innovations for small businesses in the U.S.

Capital is the lifeblood of small-to-medium businesses (SMBs) in the United States, and 52% aren’t getting their financing needs met. Owners are always short on time, but when they apply for a loan, they’re asked to collect a fragmented pile of financial documents from many different sources. It’s a slow process that can give SMB lenders an incomplete picture of the business’s actual financial health. Qualified small business borrowers can be denied access to capital when their finances are depicted by static documents that don’t tell the full story.   

If the limited data that legacy processes offer is all lenders have to base their approvals on, there are going to be many  denials issued in a marketplace of 36.2 million U.S. small businesses. A simple lack of available information can hamper the opportunity for innovative SMB lending partners to serve more customers and grow their portfolios. Fintechs and forward-thinking lending institutions may explore more profitable segments instead, leaving the small business owner with fewer options to fund operations.   

Business credit cards are often considered one of the main ways small business owners secure funding, followed by small business loans. Owners are increasingly embracing the speed and ease of digital solutions, however. Within the last year, 59% have applied for financing. 

Timing is crucial to a small business owner, and next-gen solutions that match the speed of today’s digital economy are a necessity. When a small business owner can leverage open finance to permission the limited use of their data with an app or service, the next-generation lending experience begins. With Mastercard’s connections covering 95% of deposit accounts in the U.S., we can enable more of your SMB customers to permission their business account data through a fast, simple, secure process.

Building open finance into lending services enables SMB lenders to seamlessly gain insights into business operations in real-time and give the SMB owner a low-friction digital experience. Save them time and give them better access to capital – two priceless assets every small business needs.   

Lending to SMBs with the limited data that traditional lending processes offer can be slower, riskier and more expensive. Enabling SMB customers to permission their real-time data can fill in the missing pieces in their financial picture, so lenders can identify more qualified borrowers and acquire more loans with less risk.   

Both lenders and borrowers want a streamlined and accelerated lending process. With open finance data, lenders can cut down on costs and borrowers can get loan terms that are based on their actual financial health, not the limited view that manual processes give. Owners don’t have to collect and send as many documents over non-secure channels or endure extended review periods before receiving a lending decision.  

Market fluctuations, seasonal income swings, equipment failure and a host of other concerns can affect how a small business manages its repayment obligations. With teams dedicated to supporting machine learning and artificial intelligence, Mastercard’s Open Finance  leverages these capabilities to analyze, detect and categorize up to 24 months of transactions, balances, cash flow, loan payments and non-sufficient funds (NSF) histories, delivering a more comprehensive view of a business’s finances and its ability to repay a loan.   

This is the data that lenders need to acquire more of the small business customers whose complex finances can disqualify them for credit, when their approval is based purely on bureau information and bank statements. Smarter data makes for better lending decisions. It can speed up credit decisioning while enabling accurate, predictive modeling for future payment success, powering new innovations like analytics-enabled business cards with dynamic lines of credit.  

With smarter data, risk can be better priced and brought in line with safe modeling, opening up the opportunity to help more small businesses grow and flourish. Data and intelligence work together to complement bureau reports, enabling innovators to identify hidden risk factors and create unique lending products, while giving small business owners truly diverse, inclusive opportunities to access capital with better terms.  

Open finance can deliver a low-friction, intuitive experience to busy small business owners, driving growth for your SMB lending portfolio. With the advantage of more data through open finance, innovators can create unique lending products and go to market faster. Microfunding for small manufacturers, seasonal capital for restaurants or any other niche can be developed for and served.

The ability to offer customized underwriting for small businesses is only part of the solution. Mastercard’s Open Finance adds the ability to open more accounts, manage services and set up payments more effectively, speeding time to market and ease of integration.

Small business owners can have numerous accounts across an ecosystem with thousands of banks, fintechs and credit unions, and split between business and personal accounts. Cleaned, categorized data across accounts enables a real-time view for both owners and SMB service providers, with insights that give a welcome advantage in strategic financial planning.

With Mastercard open finance technology, grow your portfolio while protecting against fraudsters. SMB owners can permission their data easily and have verified accounts up and running quickly on your platform, limiting exposure to fraud and drop-offs. Verified account and routing numbers reduce cost and manual error, increasing payment success.

The Mastercard Open Finance solutions provide a trusted technology base and best-practice API connectivity that enables innovators to achieve scale, speed and agility while empowering SMBs to benefit from their financial data. Using data, analytics, predictive insights and solutions for SMB use cases, we enable financial service providers to develop profitable business opportunities with low risk.  

Mastercard can support you in creating the right strategy to lend to small businesses and stay competitive in an ever-changing environment. Read our report to find out what small businesses are looking for from their financial service technology providers. 

*Certain open banking services are delivered through the former Finicity, a Mastercard company.