Open Banking Lending Rises by 60%: Is the End of the Hard Credit Check Here?

Published: 8 December 2025 | By: Money Navigator Research Team

For decades, small business borrowing was ruled by a simple, often brutal metric: the credit score. If you had a “Thin File” or a past default, the answer from high-street banks was almost always “No.”

But new data for Q4 2025 shows a seismic shift. Usage of Open Banking for lending decisions has risen by over 60% year-on-year, with more than 1 in 5 UK businesses now using the technology to access finance.

This surge is driving the biggest change in business finance since the 2008 crash: the rise of the Soft Credit Check.

What is Driving the Change?

Traditional credit scores look backward. They tell a lender what you did 3 years ago, but they are terrible at showing how your business is performing today.

Open Banking fixes this. By giving a lender “Read-Only” access to your business bank account, they can instantly analyse your real-time revenue, cash flow, and affordability.

• The Result: Decisions are made in minutes, not weeks.

• The Benefit: Lenders can approve businesses with Bad Credit because they can see the cash is actually there to repay the loan, regardless of a historic default.

The Death of the “Hard Check”?

Not quite, but the industry is moving that way. In the past, applying for a loan meant an immediate Hard Credit Check, which left a permanent “footprint” on your credit file. Too many applications would damage your score further.

Today, agile lenders like Iwoca, Tide, and Capital on Tap use Open Banking to perform a Soft Check first. This allows you to see your eligibility and interest rate without affecting your credit score. The “Hard Check” is now typically reserved only for the final contract signing.

Who are the Winners?

• Startups: With no trading history to generate a credit score, Open Banking allows startups to prove their worth via daily transaction data.

• Sole Traders: Often penalized for personal credit blips, Open Banking allows lenders to separate business performance from personal finance.

• Security Conscious: Fraud rates in Open Banking transactions are currently 0.013%, significantly lower than traditional payment methods, making it one of the safest ways to share data.