Plaid, Codat Team To Target UK SMB Loan Sector

Plaid and Codat unveiled a new offering in the U.K. that the companies say will make it easier for small- to medium-sized businesses (SMBs) to apply for loans and easier for banks to review a wider-than-usual array of financial data in making credit decisions, according to a Plaid corporate blog post.

“Through the partnership, Plaid and Codat aim to help streamline the loan underwriting process,” the post stated. “Despite [SMBs’] outsized role in the U.K. economy, the obstacles they face in financial services are often ignored.”

The post continues: “Fifty-seven percent of all [SMB] credit applications are either abandoned because they are just too hard, or ultimately rejected. And the average conversion of [SMB] loans from a sampled high street bank was only 8 percent. Together, Plaid and Codat will enable [SMBs] to instantly connect and share a comprehensive range of their financial data with lenders during the application process so they can more quickly gain access to the capital they need. “

Plaid, which has about 500 employees spread across five offices, makes application programming interfaces (APIs) focused on connecting smartphone apps with financial institutions, according to its website. London-based Codat also makes an API and focuses on helping SMBs connect various systems and sources of data, according to its website.

In addition to making it easier for banks to assess risk before making credit decisions, the post stated the technology also will allow banks and businesses to set up arrangements through which lenders can easily monitor cash flow or other metrics that can point early to challenges.

The new offering from Plaid and Codat comes at a time that some observers have described as rife with borrowing opportunities for U.K. SMBs due in large part to the British government’s Bounce Back Loan Scheme, which as of November had created $53 billion in financing for the sector.

Earlier this month, American Express Ventures and PayPal Ventures announced they had invested in Codat, which rolled out products in the United States.