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London-headquartered fintech Beacon plans to use open banking to assess customers’ bank account data in real time, enabling it to improve its credit offering to SMEs, the company has revealed. 

Beacon, which provides a digital supply chain and freight platform, will also use other technology to access clients’ live accounting information.  

The company’s head of supply chain finance, Brenton Booth, says the move will help Beacon manage and monitor risk, while ensuring customers can be onboarded more quickly and, if appropriate, gain better access to credit. 

“Traditional banks have historically extended credit to SMEs based mainly on having security cover, and have often had to make credit decisions based on relatively outdated financial information – so accounts once the quarter is finished, or annual published financials once the year is ended,” Booth tells GTR.  

“As a data company, Beacon has visibility around customers’ supply chains, and as part of our finance product, we are looking to work with our customers in accessing their accounting information on a real-time basis, along with access to their bank accounts using open banking.” 

Open banking involves customers granting a regulated third-party provider access to their bank accounts, in order to gather data and make payments. In the UK, that access is facilitated by application programming interfaces (APIs) built by the banks. 

Though the concept was first brought into the regulated environment by the EU’s second Payment Services Directive (PSD2), it has since been drafted into UK legislation. Its rollout has been overseen by the industry-led Open Banking Implementation Entity. 

In trade finance, Booth says real-time access to a borrower’s account information “is important because it allows us to look at customers differently when it comes to credit, putting us in a good position to assess and manage credit differently for SMEs”. 

He says Beacon has held discussions with third-party providers in recent months and hopes to have the capability launched “very soon”. 

Bringing that data together with accounting information – which is separate from open banking but also technology-driven – could prove “extremely powerful” in supporting Beacon’s finance offering, Booth adds. 

The move follows the launch of Beacon’s financing product in August this year, and comes amid surging demand for digital tools that help with supply chain optimisation. 

In October, the company raised US$50mn in a series B funding round. Previous investor Jeff Bezos, founder of Amazon, was among the participants. 

At the time, co-founder and chief executive Fraser Robinson said the disruption to supply chains prompted by the Covid-19 pandemic has reinforced the need for companies to use technology in order to ensure supply chains are resilient and reliable. 

Booth says: “As a result of the disruption in global supply chains, the actual cost of moving goods has skyrocketed, and that has meant customers that were previously able to get by with funding from their traditional banks have needed additional lines of credit. At the same time, for a lot of SMEs, accessing credit is a challenge anyway.” 

Because the financing Beacon’s platform provides – a revolving credit facility – is largely unsecured, Booth says it can sit alongside clients’ existing primary banking facilities, providing them with additional credit relief.