Open banking has been a game-changer for small and medium-sized enterprises (SMEs) since its inception, and for Singaporean businesses beginning to leverage it, it’s opening doors to funding that was once out of reach.

Traditional banks have long been the main source of SME loans, but their processes can be slow, paperwork-intensive, and restrictive. In fact, many SMEs feel underserved by conventional lenders’ one-size-fits-all approach.

This is where open banking and non-bank lenders step in, providing innovative ways to complement, rather than replace, traditional bank loans.

Open banking – the secure sharing of financial data via APIs – is transforming how SMEs obtain credit, enabling fintech and alternative lenders to offer faster, more flexible funding alongside banks.

The result is a more unified financial solution for business owners, where multiple financing options work together to meet all their needs.

SMEs’ need for unified financial solutions

Small business owners increasingly prefer simplicity and consistency in their financing partners.

According to recent research by IDC, 85% of SME leaders in Asia would rather use a single financial partner for all their needs. In Singapore, 80% of SMEs share this preference, with more than half seeking end-to-end solutions that unify services across their business – from everyday banking to loans. Additionally, 24% of Singapore SMEs value institutions that can reuse existing data and banking history to streamline services.

This underscores a strong demand for a holistic experience. Traditionally, no single provider (bank or otherwise) could cater to every requirement; SMEs often juggle multiple providers for different products (e.g. one bank for a term loan, another for trade finance). This fragmentation is inefficient and time-consuming for busy entrepreneurs.

Open banking offers a remedy by enabling data sharing and integration. With open banking, an SME can allow a trusted lender to securely access its banking data (transaction history, credit info, etc.), making it easier to bundle services and get personalised offers.

In essence, open banking serves as the connective tissue that can tie together banking and non-banking services into one unified user experience. It empowers fintech lenders to plug into the SME’s financial ecosystem, offering complementary products without requiring the SME to leave its primary bank. This is crucial in Asia where a vast majority of SMEs crave consolidated finance solutions.

How open banking enables complementary lending

Open banking is a catalyst for collaboration rather than competition. It allows traditional banks and fintech lenders to each play to their strengths in serving SMEs.

By granting third-party lenders access to financial data (with client consent), open banking makes it possible for alternative lenders to evaluate creditworthiness quickly and accurately, even for businesses that banks might overlook.

Studies show that fintech lending extends credit to SMEs that were less likely to get bank loans, effectively complementing traditional lending by reaching the underbanked.

This complementary approach works both ways: alternative credit can even act as a stepping stone for SMEs to later obtain bank financing. The Bank for International Settlements states that when SMEs build a track record by borrowing from fintech or alternative lenders, it helps banks eventually extend credit to them – the new lenders help create a credit history that banks recognise.

Across Asia, similar models are already emerging. In Hong Kong, initiatives such as the Hong Kong Monetary Authority’s Commercial Data Interchange enable banks to use alternative business data to assess SME creditworthiness, while Malaysia’s growing fintech and peer-to-peer financing ecosystem is expanding funding pathways for businesses that may later transition to traditional bank lending.

In other words, fintech loans often fill immediate funding gaps and prove the SME’s viability, after which banks may feel more comfortable lending. Regulators see promise in this synergy; expanding open banking data-sharing policies could allow SMEs to seamlessly share their transaction history with various lenders that use advanced analytics, improving credit access overall. It’s a win-win: banks get better-informed borrowers, and SMEs get more options.

Benefits of non-bank lenders for SMEs

Non-bank lenders fill important gaps in SME financing, complementing traditional banks rather than replacing them. They typically provide:

  • Higher approval rates: Large banks approve only about 14% of small business loan requests, while alternative lenders approve 27% – nearly double.
  • Speed and simplicity: Fintechs use open-banking APIs and automated analytics to cut paperwork and deliver decisions within hours. Bizcap’s underwriting in Singapore, for example, averages funding approval in less than three hours, with same-day funding possible.
  • Flexible risk models: Instead of relying solely on credit scores, non-bank lenders consider cash-flow trends and alternative data. This lets them support SMEs with limited collateral or thin credit files.

These advantages make non-bank providers a natural complement to banks, not a substitute. In fact, research shows fintech borrowing can increase an SME’s chances of later securing a bank loan by building a recognised repayment record.

Open banking in action: Bizcap

Bizcap illustrates this complementary model. By tapping open-banking data (with customer consent), Bizcap evaluates real-time cash flows and issues fast, flexible loans.

Bizcap’s presence in Singapore speaks directly to the demand for unified solutions. Its product range already includes small business loans of $5,000 to $500,000, as well as bridging finance (or caveat loans) and a line of credit. For SMEs, this means multiple funding solutions from a single partner.

A complement, not a replacement

Traditional banks remain vital for large facilities and deposits, but open-banking collaboration allows SMEs to enjoy the speed of fintech and the stability of banks. In most cases, alternative finance is complementary to bank lending.

For Singapore’s SMEs, the takeaway is clear: embrace complementary lending options. Pairing a trusted bank relationship with an agile non-bank provider like Bizcap offers the best of both worlds – fast access to capital today and stronger borrowing potential tomorrow.