OakNorth, the digital bank for entrepreneurs, by entrepreneurs, has partnered with Marqeta, the global modern card-issuing platform, to enable its Business Banking customers to see a more holistic view of their finances and in turn, manage cash flow more effectively. 

This has been made possible due to a new commercial debit card for OakNorth’s customers, facilitated by the Marqeta platform. Small and medium-sized businesses (SME) account for 99.9 per cent of businesses in the UK and power the majority of private sector jobs. Despite being a critical part of the economy, UK SMEs are struggling, citing costs £10,000 higher in 2023 than the prior year.

In addition, the Bank of England estimates that there is an SME funding gap of £22billion in the UK. By partnering with Marqeta, OakNorth will provide its SME customers the services typically only available to commercial banking customers. This includes deposit accounts and tools to automate bill payments. In turn, this will help them plan for rising costs and thrive amid economic uncertainty.

“We’re proud to work closely with our customers to build a highly tailored solution that fits the unique needs of their business,” said Kristjan Kaar, chief product officer, at OakNorth. “We selected Marqeta because of its innovative approach to building a card program that would enable us to create a bespoke experience for our customers and support them in their growth ambitions.”

Empowering scale-ups

Launched in September 2015, OakNorth is a digital commercial bank, empowering scaling businesses (£1million – £100million turnover) to support growth, prosperity, and innovation. Since its launch, OakNorth has helped create over 40,000 new jobs. It has also supported businesses across the UK and across a variety of sectors. OakNorth specialises in supporting ambitious entrepreneurs and businesses that are underserved by traditional banks.

“Traditional banking products aren’t always a fit for the specific needs of small and medium-sized businesses. Furthermore, they lack the flexibility that they need in pivotal periods of growth and expecting them to fit into a one-size-fits-all solution,” said Todd Pollak, chief revenue officer, Marqeta.

“OakNorth Bank knows the complexities facing SMEs today. By partnering with Marqeta, we will be able to provide their customers with debit cards with customisable controls. These will help them limit spending and give customers a full view of expenses, along with tools to help them invest more in their business.

“With Marqeta’s single global platform, we can support OakNorth as the bank continues to grow and expand into new markets, ensuring customers have the same bespoke experience and control of their program as it scales.”

A new industry-led taskforce, chaired by the Centre for Finance, Innovation, and Technology (CFIT), aims to unlock the full potential of open finance.

Building on CFIT’s prior work, the taskforce will provide recommendations to the UK Government on leveraging financial data to improve SMEs’ access to credit.

The Economic Secretary to the Treasury, Bim Afolami MP, unveiled the taskforce at the 10th annual
Innovate Finance Global Summit (IFGS) at the Guildhall in the City of London.

“Open banking has been a resounding success,” he said: “It has made the UK a global leader with over nine million consumers using this technology today. It is clearly demonstrated that fintechs can use technology to deliver tangible benefits to consumers and businesses alike through drawing on customer data.

“That is why the government is working to secure the foundational framework of open banking, including new regulatory framework that you ready to frame up to oversee data sharing in financial services.

“I’m thrilled today to announce the official formation of an open finance taskforce. The taskforce will craft a clear set of recommendations. pinpointing the datasets of commercial incentives necessary to drive forward CFIT’s SME lending use case for open finance.”

The new taskforce

The taskforce will mandate identifying and prioritising more use cases for open finance, determining data sets to unlock, as well as creating APIs to facilitate better SME finance availability.

It will also identify commercially viable approaches to incentivise businesses to securely share their financial data, before considering appropriate next steps towards implementing any agreed recommendations.

Ezechi Britton MBE, CEO of the Centre for Finance, Innovation and Technology, said: “Britain has long led the way when it comes to innovation in financial services, and open finance is the next great opportunity for our economy.

“So we’re delighted to have been invited by the EST to chair a new industry-led taskforce of leading financial institutions and technology companies. CFIT was founded last year to unblock the barriers to the growth of the UK fintech industry and today’s announcement will ensure we continue to keep up the momentum.”

The Blueprint Report released by CFIT in late February highlighted the importance of advancing proofs of concept (PoCs) developed in collaboration with Citizens Advice and HSBC.

These PoCs aim to demonstrate the tangible benefits of open finance for vulnerable consumers and in boosting SME lending volumes. CFIT is actively discussing strategies with its partners to scale these PoCs and anticipates providing updates on this initiative soon.

The inaugural SME Confidence Index report from UAE’s RAKBANK unveils a thriving post-Covid-19 landscape, with SMEs showcasing robust growth and optimism.

The index offers a detailed analysis across key industries, including construction and manufacturing, transport, trading, public services, professional services, and consumer and retail services.

Two in three SMEs expressed a positive view of the future business environment in the country, according to the report by RAKBANK in collaboration with independent research company RFI Global.

The report’s overall confidence index for UAE SMEs stands at 61, based on RFI Global‘s analysis of UAE macroeconomic indicators and a survey of over 1,000 SMEs conducted between November and December 2023.

It also reveals SMEs’ growth is propelled by notable increases in revenue over the past two years, especially within key sectors such as construction and manufacturing, and public services.

“Small and medium enterprises are the backbone of every healthy economy, and this is especially true in the UAE, where SMEs make up 94 per cent of companies and contribute over 50 per cent to the country’s GDP,” says Raheel Ahmed, CEO at RAKBANK.

“That is why we centred this inaugural report around the SME sector, in line with our priority of supporting this flourishing segment through actionable insights to assist in their decision-making, towards greater business growth and success.”

Inside the report

The report paints a positive economic outlook for the UAE, forecasting non-oil GDP growth of over four per cent in 2024 and an overall GDP increase of 5.70 per cent this year. Notably, the RAKBANK SME Confidence Index highlights signs of recovery, including hotel occupancy rates approaching pre-pandemic levels, signaling a revival in the tourism sector.

However, it also acknowledges challenges facing SMEs, such as rising labour and operational costs, the imminent introduction of corporate tax, and financial constraints. Overcoming these obstacles requires continued support from financial institutions, complementing government initiatives.

Leveraging robust macroeconomic data and business sentiment analysis, the report highlights a buoyant business environment, particularly evidenced by the issuance of new business licences in Dubai. Despite challenges like oil price fluctuations, macroeconomic indicators indicate favourable conditions for SME growth.

SMEs are actively pursuing innovation and expansion, with a keen focus on launching new products/services and responding to customer demand. Banking support emerges as crucial, with high satisfaction levels among SMEs for tailored financial solutions.

Dhiraj Kunwar, MD business banking at RAKBANK, also added: “RAKBANK has a rich legacy of supporting SMEs, and the launch of our Index in partnership with RFI Global builds upon this legacy, as the UAE’s first SME-specific confidence survey. We trust that this report will bring genuine value to small and medium enterprises who are seeking out credible content and data points to align their business strategy.”

When SMEs look to trade abroad, they can often find themselves facing management challenges when it comes to organising and ensuring all their accounts in different regions are accurate and working as they should. Looking to alleviate this issue in the UK, WorldFirst, a one-stop digital payment and financial services platform for global businesses, has launched a new e-commerce growth solution.

Called the World Account, the new solution by the payments platform specifically focused on SMEs in international trade brings down the costs associated with making an international transfer for UK firms. Typically these costs which span compliance, FX and payment operations account for two to three per cent of the value of a transfer.

However, with the World Account this is reduced to less than 0.75 per cent, according to WorldFirst industry analysis. This helps SMEs boost their margins to sustain long-term business growth.

Untapped opportunity in cross-border e-commerce

Global trade is expected to grow by 3.3 per cent this year and retail e-commerce sales are expected to grow 8.8 per cent over the same period.

However, in the UK, the Office for National Statistics’ most recent Annual Business Survey of Exporters and Importers revealed that just over one in every 10 UK businesses (11.4 per cent) are involved in exporting. This is a number that had only risen by 0.7 per cent in the preceding three years. When polled by a UK bank, 80 per cent of businesses agreed that exporting is critical to their business’ future.

Bruce Ding, general manager of WorldFirst International Business, notes: “Against this backdrop, there’s an excellent opportunity for many more UK SMEs to tap into the opportunities of international trade. Despite the complexities involved in cross-border e-commerce, with the support of external partners like us, we’re seeing SMEs are increasingly optimistic about the opportunities presented by exporting overseas.”

In 2022, the total cross-border e-commerce market in Europe, including the United Kingdom, amounted to a turnover of €265billion (excluding travel). Of this total, €167billion, or 63 per cent, was generated by marketplaces. However, European countries are falling behind compared to those across South America and Asia, where multiple markets have seen significant growth in e-commerce sales, according to eMarketer.

Younger generations drive cross-border e-commerce

WorldFirst finds that more than 50 per cent of sellers using its cross-border e-commerce solution are Gen Z or Millennials. This suggests these generations of business leaders are more aware of global e-commerce opportunities.

Ding adds: “Consumers are increasingly buying directly through SMEs’ websites, online marketplaces and social media platforms. This means people are purchasing from businesses located across the globe without even realising they’re doing so. Younger business owners have spotted this opportunity to run their independent e-commerce stores or set up fronts on global e-marketplaces.”

However, challenges, ranging from the complexity in international payment and foreign exchange, payment fraud, and hidden service charges, still put away aspiring business owners, threat survival of start-ups and undermine durability of existing businesses.

To help solve these challenges, UK SMEs can streamline international operations by partnering with external vendors. UK business owners can open a World Account within minutes to be able to trade like a local around the world. The account supports payment collection with 14 local or cross-border accounts and pay-out in more than 40 currencies to over 130 countries and regions. WorldFirst’s extensive partnerships with key e-commerce platforms facilitate seamless cross-border transactions.

WorldFirst has a strong track record in driving growth in e-commerce for SMEs. WorldFirst is the top payment service firm by transaction volume for China-based e-commerce businesses which sell on international e-marketplaces, such as Amazon and Lazada. In January 2024, new customer acquisition by WorldFirst in South-east Asia increased 16 times and the overall transaction volume of its customers in the region grew by 90 per cent on year.

Allica Bank, which offers full-service banking for SMEs with between five and 250 employees, is backing a new campaign looking to shake up the SME business savings market, which is leaving small businesses shortchanged. 

SMEs across the country are losing out on more than £7.5billion of interest each year due to big banks shortchanging them on their savings. To combat this, the new Great British Savings Squeeze campaign is hoping to draw attention to banking inequalities faced by small businesses.

The campaign, backed by the likes of the Institute of Directors, Federation of Small Businesses and the British Independent Retailers Association, calls for banks to offer small businesses the same savings rates as big firms.

It also urges banks to actively notify their SME customers of the top three rates in the market; while increasing the protections for SME deposits to give small firms confidence to save large amounts with all banks, by raising limits for the small business Financial Services Compensation Scheme.

Richard Davies, CEO of Allica Bank, said: “It is a scandal that SMEs are missing out on more than £7.5billion of interest on their hard-earned cash every year, leaving small firms short-changed and holding back vital funding from local economies.

“The variation in interest rates offered to companies of different sizes exploits both the lack of transparency in the market and the limited time many small business owners have available to optimise their finances.

“This campaign will bring attention to that fact, and our goal is for there to be a much greater focus on savings rates for small businesses, in the same way there has been from politicians and regulators on savings rates for consumers.

“We are determined to drive change in the business savings market – Britain’s established businesses deserve better.”

The £150billion problem

Allica Bank has long been calling on the wider banking industry to give small businesses a better deal on their savings, allowing this money to be pumped back into local economies. In October, the firm wrote to the Treasury Select Committee (TSC) asking MPs to investigate the lack of transparency in the business savings market.

It has now reiterated this call with a second letter to the committee, requesting that the TSC ensure it covers the investigation of the business savings market in the SME Finance Inquiry it is shortly due to conclude.

Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said: “It’s time SMEs got a fair deal on their savings, after all the least any bank should be doing is offering a decent savings rate to SMEs.

“Britain’s army of small firms have enough on their plates without having to worry about the rates they’re getting on their hard-earned savings.”

Dr Roger Barker, director of policy at the Institute of Directors, said: “Britian’s hard-working SMEs deserve to be supported – including by their bank. It’s a tough economy out there to survive as a small business, so it’s vital SMEs are getting decent interest rates on their savings.”

Research conducted by Allica Bank shows that SMEs are typically offered savings interest rates which are two per cent lower than rates offered to bigger companies – simply because they are small businesses.

Meanwhile, around £150billion of SME deposits are sitting in current accounts which offer no interest at all.

The Great British Savings Squeeze campaign is aiming not just to raise awareness of this hidden savings penalty but also to gather high-profile support and drive real industry-wide change in the sector.

Ebury, the fintech specialising in transactions for SMEs, has expanded its partnership with Nium, the real-time global payments company, to deliver a new global remittance service in Brazil.

With the new remittance service, Nium and Ebury plan to enable businesses to send or receive fast, reliable, and affordable cross-border payments to and from Brazil. This move builds on the duo’s existing partnership in Europe, in which London-based Ebury leverages Nium’s global payments infrastructure to send international supplier and payroll payments around the world.

The announcement follows regulatory approval of Ebury’s acquisition of Brazilian fintech Bexs, which includes the businesses Bexs Banco (foreign exchange) and Bexs Pay (payments) in October 2023.

Ebury will integrate Nium’s cross-border payment solution for banks and FIs into its high-scale payment flows to improve the speed, efficiency, as well as to reduce the cost of international business transactions.

Luiz Henrique Didier Jr, executive director at Ebury Bank in Brazil, discussed the news: “Our mission is to connect Brazilian consumers to the world and the world to Brazil’s consumer ecosystem. The best way to do this is to use high-technology solutions and global coverage, such as those offered by Nium, which bring security and effectiveness to transactions. This is a game-changer for us. The product demos gave our team a lot of confidence and the technological integration process was seamless and conclusive, reflecting a great start for the partnership.”

The partnership will also enhance Brazil’s connection to new emerging markets that would otherwise be out of reach. Currently, Nium’s payment network supports payouts in over 100 currencies to more than 190 countries, 100 of them in real-time.

Supporting Brazil’s underbanked SMEs

Building on its global customer base and breadth of coverage across APAC, the US and EMEA, Nium is focused on LATAM as a strategic growth market. It has operated in the region for some time but marked its formal entry with the opening of a local office in Sao Paulo in August 2023. Nium’s agreement with Ebury is its first bank partnership in Brazil.

Christina Hutchinson, general manager, Brazil and head of business development, LATAM at Nium, also explained the need for the new solution: “Brazil has tremendous potential to set a global example in digital payment innovation.

“But today, businesses and individuals here continue to face costly hidden fees, significant delays, and uncertainty every time they send or receive international payments via traditional wires or legacy banking systems. We are thrilled to expand our existing collaboration with Ebury in Europe to help Brazil’s underbanked SME and consumer population access more affordable and efficient ways to send and receive money. This is another great example of how cutting-edge cross-border payment solutions are having a meaningful impact on the lives of millions of people around the world.”

Forecasts suggest that Brazil’s digital payments market could grow to a total transaction value of $170billion in 2024. Government statistics indicate there are currently over 21 million SMEs in Brazil.

Global payment processor Mastercard has opened the doors to new applicants for its new initiative aiming to accelerate the development of solutions to support small businesses across Europe: the ‘Strive EU Innovation Fund’.

The new Strive EU Innovation Fund will provide equity-free grants of up to €500,000, alongside technical assistance and mentoring to as many as 20 projects from EU member states. Ultimately, Mastercard hopes to accelerate the development of these new solutions and get them to market faster.

Applications are open to entities of all sizes – from startups to those that are more established – provided they are soliciting innovation that helps Europe’s small business community to:

1. Unlock working capital and credit through embedded finance;
2. Go digital safely by bolstering cybersecurity;
3. Navigate consumer preferences and regulatory expectations around environmental sustainability;
4. Harness artificial intelligence (AI) to improve efficiency and income.

Mark Barnett, president of Mastercard Europe, explained the motivation behind the initiative: “Small businesses are the backbone of the European economy and, now more than ever, it is critical that they receive the support they need to join the digital economy.

“We are excited to open the application window for the Strive EU Innovation Fund and to hear about some of the best projects coming from Europe’s most innovative minds over the coming months.”

In addition to the new Innovation Fund, Mastercard plans to establish a ‘Strive EU Small Business Council’ to convene the European entrepreneurial ecosystem and encourage collaboration. The Council will play a key role in selecting the final recipients of the Innovation Fund and supporting winners with financial resources and mentorship throughout the initiative.

This Council will comprise 10 to 15 influential experts, private sector entities and small business representatives, who are set to be announced early next month.

Bolstering the global Strive programme

The new fund becomes the latest development of Mastercard’s global Strive programme; as well as the first dedicated activity for Strive EU, which was launched in November in the European Parliament last year.

Through Strive EU, Mastercard aims to further boost the resilience and growth of Europe’s small business community by supporting new innovations across the EU that help small businesses get capital, go digital, and gain networks and know-how.

Payal Dalal, senior vice president of social impact and international markets at the Mastercard Center for Inclusive Growth, commented: “Digital advances have the potential to serve as a bridge to ensure that everyone, particularly small businesses that power our economies, has the tools to grow and build their businesses and remain resilient.

“We look forward to taking our learnings from our Strive programmes so far and extending our reach and scale across Europe.”

Strive EU will look to build on the strengths of two country-specific initiatives in Europe, Strive Czechia and Strive UK. Since launching in 2021, Strive UK has reached over one million entrepreneurs, connecting them to resources, training, and mentors to help them navigate the digital economy.

Paymob, the financial services enabler in the Middle East, North Africa, and Pakistan (MENAP) has become the first international fintech company to be fully licensed in Oman following receipt of a Payment Service Provider (PSP) licence.

The PSP license authorises Paymob to accept and process online and in-store payments in Oman, powered by its local integration with the Central Bank of Oman‘s (CBO) secure payment infrastructure, OmanNet. This milestone enables merchants in the Sultanate to accept both local and cross-border payments through Paymob’s gateway. As such it eliminates the need for multiple gateway integrations. Paymob secured the PSP license upon complying with all the regulatory requirements of CBO’s framework.

Oman is on an accelerated path toward the digital transformation of its banking sector, guided by the country’s Vision 2040 which aims to diversify its economy. Between 2018 and 2022, ATM, POS and e-commerce transactions processed through OmanNet have increased 300 per cent. From 82.4 million transactions to 252.9 million transactions.

Creating a thriving digital economy

With the PSP license in Oman, Paymob further delivers on its mission of creating a thriving MENAP SME digital economy. It looks to do so through a variety of innovative digital payment solutions. Paymob offers 40 payment methods which correlate with:

• higher sales, increased conversions
• improved customer retention
• appeal to a broader demographic for SMEs.

Paymob launched operations in 2015 and serves 250,000 merchants across MENAP. The company is backed by global and regional investors including PayPal Ventures, Kora Capital, Clay Point Capital, Global Ventures, FMO, A15, British International Investment, Helios Digital Ventures and Nclude.

Islam Shawky, co-founder and CEO of Paymob stated: “It is a proud moment for Paymob to be the first international fintech company to receive PSP licensing in Oman. We appreciate the vote of confidence that CBO has placed in our technology. We are committed to enabling SME growth in Oman by making cutting-edge payments solutions accessible to all merchants. Furthermore, we aim to process transactions seamlessly and securely through our local gateway.”

Paytech covers any technological innovation that changes the way we pay. Having delved into some of the environmental considerations of payments, we now turn our attention to ethical payments. 

ESG continues to be a ‘buzz term’ for the fintech and payment sectors. But beyond promises to ensure high standards, many fintechs simply do not do enough – whether that is because they lack the knowledge, the funds or another factor.

But how exactly should fintechs ensure change? To find out, we asked several fintech experts industry ‘What more can fintechs do to ensure their payment procedures are ethical?’

‘Being transparent is key’

Virginijus Doveika, CEO of SME BANK, emphasises the need for enhanced transparency across the global fintech sector: “Ethical sustainability must be a company’s essence, including its payment procedures. Fintechs have made progress, but they need to keep improving.

“Ethical payment procedures revolve around unassailable transparency, data security, and overall cybersecurity, fostering unbreakable client trust in the integrity of their data and transaction fairness.

“Boosting cybersecurity and offering good customer support can strengthen this trust. Advocating for standardised regulations can also instigate industry-wide ethical consistency. Being transparent is key to avoiding false claims and truly earning trust.”

Fintechs should ‘safeguard customer data responsibly’

As Raman Korneu, CEO and co-founder of digital banking platform myTU, explains: “To make payment procedures more ethical, fintech companies can take several steps.

“First, they should follow the rules and laws related to data protection, consumer rights, and fraud prevention. It’s crucial to stay updated on any changes in these regulations. Second, they need to safeguard customer data responsibly, in line with regulations like GDPR, ensuring secure handling.

“Additionally, fintech firms should be mindful of the businesses they serve. They can choose not to work with industries considered unethical, such as tobacco, weapons, gambling or fossil fuels.

“Many fintech companies use AI for tasks like fraud detection and credit scoring. It’s important to ensure these algorithms are fair and transparent. Unethical algorithms can harm vulnerable individuals, offering high-cost loans or causing inconvenience by blocking legitimate transactions or freezing accounts.

“Fintechs should also educate their customers about potential risks, fraud prevention, and responsible service usage.

“Innovative ideas to enhance ethical practices could include inviting hackers to test payment systems’ security and ethical integrity, as well as rewarding those who find vulnerabilities. Real-time alerts can inform users about ethical issues, like over-indebtedness or high-risk investments. Fintech apps can also incorporate game-based tools to educate users on financial literacy and ethical choices, offering rewards for completing courses or making responsible financial decisions.”

‘Two key strategies’

Monika Liikamaa, co-founder and co-CEO of the Finland-based embedded finance fintech Enfuce, discusses the individual roles fintechs, regulators and investors can play in enhancing ethical standards of fintech payment procedures: “Enhancing the ethical standards of fintech payment procedures requires a multi-faceted approach that involves two key strategies.

“Firstly, strengthening audits and compliance measures to ensure that processes align with ethical guidelines and industry standards; and secondly, emphasising peer pressure and community standards to build accountability and a culture of shared responsibility.

“By openly highlighting and rewarding ethical behaviour while outing and condemning any unethical conduct, the industry can foster an environment where ethical practices are not only expected but celebrated.

“Finally, investors can also play a pivotal role in promoting ethical practices by conducting thorough due diligence before investing in fintech companies, and by prioritising ethical considerations and only supporting businesses with robust ethical frameworks.”

‘An ideal environment for fraudsters and criminals’

Claire Rowley, head of business operations for The Global LEI Foundation, also explained: “The cross-border payments ecosystem is highly complex, spanning national borders and jurisdictions and involving multiple financial institutions and legal entities.

“This provides an ideal environment for fraudsters and criminals to spin intricate webs to obfuscate money laundering and terrorist financing activity.

“In response, fintechs are subject to increasingly stringent anti-money laundering (AML) and counter-terrorist financing (CTF) requirements. Yet fragmentation limits the effectiveness of these initiatives, as the data currently used by fintechs to detect and monitor suspicious financial flows is not standardised or readily consumable and shareable. This inhibits collaboration and drastically limits the capacity to expose complex, global criminal networks.

“Harmonising cross-border data flows to overcome these ongoing challenges is an increasingly urgent priority for fintechs and other industry stakeholders. The Financial Action Task Force, for example, has identified data-sharing, data standardisation, and advanced analytics as underpinning effective AML and CTF initiatives across borders.

“This has important implications for the Legal Entity Identifier (LEI). As the only established universal entity identifier globally, the LEI is uniquely positioned to play a foundational role in the fight against financial crime. When the LEI is added as a data attribute in payment messages, any originator or beneficiary legal entity can be precisely, instantly, and automatically identified across borders to bolster efforts to tackle financial crime.

“In view of a broad industry consensus, integrating the LEI data – a free, global and open dataset – into payment procedures and surveillance tools – offers one simple way for fintechs to counter financial crime and, ultimately, help to ensure that cross-border payments are more ethical.”

Paytech covers any technological innovation that changes the way we pay. To kick things off, we are placing the focus on ESG finance.

One topic that continually captures more attention in finance is ESG: Environmental, Social and Governance. Environmental targets have become increasingly publicised; with some firms, big and small, accused of ‘greenwashing’, while simultaneously failing to play their part.

But, as the name suggests, ESG spans further than just environmental aspects. The social and governance of ESG are also capturing more and more attention. In an effort to understand just how this landscape has changed over time, we reached out to experts and asked ‘How has the culture surrounding ESG changed in finance?’

‘Good ESG information really helps small businesses get funding’

Virginijus Doveika, CEO of SME BANK, explained the growing demand for transparency: “In recent years and this business climate, there is an escalating demand for transparent ESG impact data from companies.

“Global trends and regulatory frameworks like the EU taxonomy are making these topics important for investors and banks, making ESG information a key way for companies to show their impact on the world. Still, there’s a big gap between big companies that can provide clear ESG information and those that can’t, especially smaller businesses.

“Investors’ growing attraction for climate and social impact consideration in their portfolios has intensified the reliance on ESG data as a risk management indicator. They use ESG info to decide if a project is a good fit and to check how it performs compared to standards like the EU Green Bond standard. This dynamic creates a challenge for SMEs lacking precise data, impeding their access to credit options in the burgeoning sustainable finance sphere.

“Having good ESG information really helps small businesses get funding. Focusing on ESG is now essential to stay competitive. For new businesses, having this info is absolutely necessary, and being open and clear about it is a must. For emerging enterprises, quality ESG data isn’t just a requirement; it’s a must. Transparency in this area is non-negotiable.

“In recent years we noticed rapidly increasing demand for financing from SMEs investing into sustainable projects, digitalisation and innovations. For example, this year we signed the guarantee agreement with the European Investment Fund under the InvestEU programme to guarantee a portfolio of more than €37million in new loans for SMEs in the Baltics, Finland and the Netherlands. In nine months we financed 80 per cent of the portfolio for SMEs investing into specifically sustainable projects.”

Increasing ’emphasis on responsible growth

Markus Prommik, CEO and co-founder of embedded lending platform Finfra, explains: “In recent years, the culture surrounding ESG in finance is moving from a mere checkbox exercise to a pivotal driver in decision-making.

“The financial industry, once predominantly driven by returns, now places equal emphasis on responsible growth. Operating a fintech startup in Indonesia, a region uniquely susceptible to climate challenges and socio-economic disparities, I’ve witnessed firsthand the transformative power of integrating ESG principles.

“Emerging markets, like Indonesia, are at the epicentre of this shift. As the demand for financial inclusion grows, so does the realisation that sustainable practices are not just ethical but also economical. ESG-focused strategies often lead to more resilient business models, catering to a broader audience and ensuring longevity.

“As the CEO of an embedded lending platform, I believe it’s our collective responsibility to drive this change, ensuring that as we progress, we leave no one behind and tread lightly on our planet.”

Many ‘ESG initiatives are still reactive’

Steve Round, co-founder of core banking engine SaaScada, discusses his take on why a reactive approach to ESG initiatives is no longer enough: “Regulation in ESG has rapidly evolved and consumer demands for responsible finance have put pressure on FS firms for transparent disclosure.

“But for many firms, ESG initiatives are still reactive, not proactive, and they could do so much more to improve their environmental and social impact by making ESG central to their culture.

“Technology is now making it possible for firms to understand how investment and purchasing decisions affect the planet ‒ measuring everything from the carbon footprint of day-to-day purchases and the ESG impact of pension investments. With a data-driven approach to transaction monitoring and loan origination, FS firms can be the greatest corporate citizens.

“Cloud banking engines can provide financial institutions the visibility needed to monitor the social and environmental impact of business operations, breaking down data silos and bringing together real-time data from disparate sources. This enables FS firms to access data quickly and cost-effectively to inform business decision-making, make ethical choices, and give incentives to customers to deliver real change. But so far this technology isn’t being harnessed by most firms.

“Ultimately, a more collective effort is needed to achieve sustainability goals. Unless all financial institutions take ESG seriously, we won’t move the needle. With a coordinated approach, the finance industry will be able to drive tangible social and environmental change that extends beyond their own boundaries.”

‘Stakeholders are demanding more of businesses’

Annu Nieminen, founder and CEO of The Upright Project, “In general, I think it is widely accepted that in 2023 ESG is something that the finance world should be ‘doing’, but as different reporting standards abound, the myriad of details that can be found about a company’s ‘sustainability’, ‘ESG’, or ‘impact’ these days can be quite overwhelming.

“Sometimes it is hard even to understand what question all these details aim to answer and how they relate to making a true difference to the existence of the company.

“A cultural shift I have noticed these days is that stakeholders are demanding more of businesses. It used to be enough for a company just to make money as long as it did not break any laws.

“Now fintechs need to present a rationale for the existence of the company, one that reaches beyond shareholder value.

“This does not come just from the regulator or investors, but increasingly it is also employees who are asking for better explanations for their employer’s purpose and impact. All in all, it is a big transformation, and not everyone will emerge as a winner.”

‘Banks can’t afford to take their foot off the ESG pedal’

Peter-Jan Van De Venn, VP of global digital banking at Hexaware Mobiquity, explained: “According to recent research, sustainable banking was a top concern for almost half (41 per cent) of UK banks in 2022, but in the space of twelve months this has slipped to just over a quarter (26 per cent).

“From board level downwards, banks have been concentrating on their bottom lines in the last year, forcing sustainability to take a back seat.

“While it’s understandable that banks are feeling economic pressures, there’s a risk that focusing on the immediate crisis will see them miss out on the long-term benefits sustainable banking can bring.

“Now more than ever, they should be focusing on sustainability initiatives, unlocking a wide range of benefits, from better customer retention to enhanced brand reputation. Despite the challenging market conditions, banks can’t afford to take their foot off the ESG pedal. They need to keep driving forward or will stop short of their targets while competitors overtake them.”