60% of Banks Say Real-Time Data Decides Who Gets a Loan

For banks, the difference between saying “yes” and “no” to a small business loan often has less to do with risk appetite than with the quality of data in front of them.

Real-time, third-party information is becoming the single most important factor in whether the smallest firms gain access to credit.

The PYMNTS Intelligence report “Keeping Score: Why Data Quality Determines Lending Decisions for the Smallest Firms,” produced in collaboration with Markaaz, surveyed 350 banking executives across the United States and the United Kingdom.

The report found widespread recognition that data gaps, such as incomplete, unverifiable or outdated records, choke the lending pipeline. Banks know that better information produces more approvals and fewer defaults. Yet many still lack the tools to make real-time decisions, especially for micro-businesses that don’t have audited financials or rich credit histories.

Sixty percent of U.S. banks reported strong interest in third-party providers offering real-time data on micro businesses and small- to medium-sized businesses (SMBs), which is an endorsement of speed over system design.

Half of banks with heavy exposure to micro-SMB clients relied on third-party data, compared with 83% of banks with lighter SMB exposure. That means institutions that are most focused on small firms were often the least equipped with external validation.

Ninety-six percent of financial institutions said they could confidently underwrite a loan if they had access to third-party credit bureau data on repayment history, but confidence dropped when the same numbers came directly from applicants.

The numbers showed that it is not that banks distrust SMBs, but that they distrust opacity.

Independent validation, whether an audited balance sheet in the U.K. or bureau-verified debt history in the U.S., unlocks confidence. Without it, banks default to caution, and micro-businesses, often creditworthy, default to rejection.

The report indicated that other ripple effects were in play. Nearly 3 in 10 micro-business applications were rejected due to unverifiable legitimacy, a rate five times higher than that of large enterprises. Approval rates fell from 95% for large companies to 77% for micro-firms, while delinquency rose more than fourfold.

Profitability tracked the same way. For example, 84% of banks with very or extremely comprehensive underwriting for SMBs considered this segment highly profitable, compared with 39% of less-equipped peers. While large banks can afford comprehensive verification systems, smaller lenders often cannot, creating an uneven playing field for the very businesses that most need community-level capital.

The findings pointed to a broader shift. Banks are not just underwriting loans; they are underwriting data. As small businesses make up most firms on both sides of the Atlantic, the winners in this market will be those that can plug into third-party sources quickly, cheaply and at scale. For lenders, the ability to see a firm in real time may soon matter more than the ability to know it over time.