The Financial Conduct Authority‘s FCA Open Finance SME lending commitment has moved a step closer to a formal framework, with the regulator naming SME lending as one of two prioritised use cases for open finance and confirming it will publish a discussion paper in early 2027 to outline options for delivering the first open finance scheme.
The announcement came alongside a broader review of SME access to finance, which found no evidence that FCA regulation is a major barrier to smaller businesses obtaining funding. That conclusion may sound reassuring, but the review is careful not to mistake the absence of regulatory blame for a clean bill of health. Many of the challenges identified, it found, relate to wider market, information and capability problems that sit largely outside the FCA’s direct control.
Where the friction actually sits
The review’s findings are most pointed when it comes to microbusinesses. These make up 95.5% of all SMEs and are less likely than larger small businesses to use external finance. The barriers the review names are familiar: limited awareness of finance options, complex application processes, duplicated checks, and difficulties accessing products suited to businesses with limited collateral or largely intangible assets. None of those problems are straightforwardly regulatory in origin, which explains why the FCA is framing its response around reducing friction rather than rewriting rules.
Graeme Reynolds, FCA director of competition, put it plainly: ‘Small businesses need to be able to access the finance they need at the right time to start up, grow and invest. Our regulation is not a major obstacle – that does not mean the system works as well as it could.’ Reynolds added that the FCA is ‘focusing on where we can make a practical difference by reducing unnecessary friction, supporting a more proportionate regulatory framework and helping unlock the benefits of Open Finance.’
Where stakeholders raised issues that fall outside the FCA’s remit, such as on alternative lending, the regulator says it has shared those findings with the relevant government departments and bodies.
FCA Open Finance SME lending: what the roadmap commits to
The open finance thread running through this review has some concrete history behind it. In April 2026, the FCA published a roadmap setting out its vision for consumers and SMEs to have greater control over their financial data, with the stated aims of enabling faster and more personalised financial services and strengthening competition, innovation and growth. According to analysis by Hogan Lovells Cadwalader, the FCA’s agile approach will see it prioritising SME lending and improving consumers’ access to mortgages as two ‘high-impact use cases’ where open finance can deliver benefits most quickly in 2026.
The early 2027 discussion paper, confirmed in the FCA’s published feedback statement, will outline options and considerations for delivering a framework for the first open finance scheme. SME lending is named as one of two prioritised use cases for that framework. The paper will not be binding at the point of publication, but it marks the point at which policy options must be stated rather than gestured at.
The FCA has also been stress-testing what open finance for SMEs could look like in practice. In its most recent SME Finance TechSprint, seven participating firms tested open finance proof-of-concepts using synthetic data to explore how they could operate in real-world scenarios. That is a limited but methodologically coherent approach: synthetic data removes the privacy and consent complications of live data while allowing the underlying product logic to be evaluated. Whether the proof-of-concepts survive contact with real-world data quality is the question the next stage will have to answer.
The review is described as complementing wider government and regulatory work to improve access to finance for smaller businesses. The FCA is focusing its next steps in three areas to help reduce friction, though the specific details of those three areas were not set out in the published materials reviewed here.
With the discussion paper due in early 2027, the next test for the FCA Open Finance SME lending agenda will be whether the options it outlines generate a workable consensus among lenders, data holders and the businesses the scheme is meant to serve.
