Innovation foundation Nesta has awarded a £100,000 prize in its Open Up Challenge to small business lender iwoca for its work on open banking technology.
Iwoca was chosen as one of 10 winners from 150 applicants by an independent panel of judges for developing products assessed as most likely to have a positive impact on UK small businesses in 2018 and beyond.
Nesta’s mission is to support new ideas to improve how the world works for everyone and its Challenge Prize Centre uses financial awards to stimulate new ideas to some of the biggest challenges the world faces.
The Open Up Challenge was launched following the publication of the Competition and Markets Authority (CMA)’s Final Report in August 2016, which endorsed the creation of a prize to stimulate the development of intelligent comparison services for small businesses.
The prize is backed by the CMA, with funding from eight of the country’s largest providers of SME banking: Barclays, HSBC, Lloyds Banking Group, RBS, Santander, AIB Group (UK), Bank of Ireland UK and Danske Bank.
The competition gave entrants access to anonymised current account data to use to build products for small and medium-sized enterprises (SMEs). Prize funding will be used to develop new products ideas.
Christoph Rieche, co-founder and chief executive officer at iwoca, said: “We’re really excited to be an Open Up Challenge winner and can’t wait to launch our open banking integration.
“Open banking will break the banks' monopoly on current account data, leading to a level playing field across business lenders.
“The era of waiting weeks or months to get a small business loan is coming to a close. This will make small business finance much more accessible and help them achieve their full potential.”
With the arrival of European open banking legislation this month, iwoca will expand its product offering to compete head-to-head with high street banks on terms, while aiming to provide a substantially better and faster service.
It plans to launch a small business loan with terms of up to five years and an alternative to the traditional current account overdraft.
Small businesses will get an instant credit decision based on their credit history and live-trading data, obtained via open banking APIs.
Iwoca says the need for alternative funding has never been greater. More than half (56%) of small businesses consider securing finance a struggle and 45% of ‘would be seekers’ state ‘discouragement’ as the primary reason they will not apply for a business loan, it reports.
Through 45,000 transactions, iwoca has funded more than 15,000 small businesses with a total of £300 million since its launch in 2012.
Businesses get approved online within minutes and can then draw down funds as required.
Iwoca aims to finance 100,000 more small businesses in the UK over the next five years.
Applications for stage 2 of the Nesta Open Up Challenge, focused on market-ready systems, will open later this year.
Full list of winners:
Bud - financial management app: thisisbud.com
Capitalise.com - business loan comparison: capitalise.com
Coconut - a current account for freelancers: getcoconut.com
Credit Data Research - credit Scoring for SMEs: creditdataresearch.com
Fractal Labs - automated financial assistant for businesses: fractal-labs.com
Fluidly - cashflow management: fluidly.com
Funding Options - business lender comparison: fundingoptions.com
Handle (by Bizfitech) - digital reputation management: gethandle.com
Iwoca - credit for small businesses: iwoca.co.uk
Teller - APIs for bank accounts: teller.io