RBS has disbursed funds across a number of banks and finance companies, with the most recent announced last week.
The disbursement has been an opportunity for some of the UK’s more innovative finance companies, namely FinTechs, to gain finance – but where has the money come from and why are other UK banks being awarded the funds?
What is it?
In 2008, during the financial crisis, RBS was bailed out to the tune of £45.5bn from the taxpayer. A condition of the EU’s bailout was initially that RBS would split off hundreds of its branches into smaller businesses, but this proved problematic and costly. As such, the disbursement plan was put in place to boost competition in the UK’s small business sector. Now, RBS is set to give out funds to rivals in a series of grants and loans overseen by the Banking Competition Remedies body.
The pool of cash – which companies were able to compete for – amounts to £775mn in total which must be used for the UK’s small business sector. £350mn is aimed at encouraging customers to switch banks, while £425mn is set to fund investment in business banking services.
Where is it going?
The funding has been spread across a range of companies, with businesses competing for various types of grants. It’s interesting to see that as well as bigger banks and building societies, many innovative startups and FinTechs are also among the recipients.
The £350mn has been divided among 11 banks which RBS customers may choose to switch to. These include Arbuthnot Latham, CYBG, The Co-Operative Bank, Hampden & Co, Monzo, Nationwide Building Society, Santander, Starling Bank, Handelsbanken and TSB.
The remaining £425mn has been allocated to a range of businesses from popular FinTech Starling to some lesser-known technology startups.
These include:
- Metro Bank PLC (£120mn) – a UKbased retail bank which, at launch in 2010, was the first ‘new’ high street bank in 150 years.
- Starling Bank Ltd (£100mn) – one of the UK’s biggest challenger banks, which is digitalonly and has no physical branches.
- ClearBank Ltd and Tide4 (£60mn) – the clearing bank which offers innovative services has partnered with Tide which has a digital banking platform. Together, the two intend to raise more funding to add to the investment with the goal of helping entrepreneurs and SMEs scale.
- Nationwide Building Society (£50mn) – a UK household name founded in 1846, Nationwide has recently launched a new range of products for business customers.
- Investec Bank PLC (£15mn) – an international specialist banking and asset management group, Investec will add the funds to a pot totalling £300mn to support more than 8,000 small businesses.
- The Cooperative Bank PLC (£15mn) – the UK’s seventh biggest lender, the bank will put the funds toward boosting its share of the small business banking market to 5% by 2025.
- Atom Bank PLC (£10mn) – a digital challenger bank offering mortgage and savings services, the company will use new technologies such as machine learning to roll out innovative business products.
- Iwoca Ltd (£10mn) – a business lending startup which plans to form a partnership with Xero, an online accounting platform.
- Modulr Finance Ltd (£10mn) – an emoney institution which operates largely out of Edinburgh – the finance will be used to create new jobs at this facility.
- The Currency Cloud Group Ltd (£10mn) – a London headquartered international payments business, Currencycloud will use the money to expand its crossborder platform.
- Codat Ltd (£5mn) – the Codat.io platform allows SME financial service providers to connect with software platforms used by the businesses to manage their finances.
- Fluidly Ltd (£5mn) – a tech business specialising in AIdriven cashflow management software to support small businesses.
- Form3 Ltd (£5mn) – alongside Ebury, Form3 is building the first APIbased global transaction platform for UK SMEs.
- Funding Options Ltd (£5mn) – a small business finance broker, which will fund an additional 10,000 small firms with around £500mn in alternative lending by the end of 2022.
- Swoop Finance Ltd (£5mn) – a firm aiming to speed up access to finance including loans and grants for businesses. Swoop will invest further in cloud and API based technologies to improve its offering.
What does this mean?
Overall, it’s hoped the backing of such a variety of organisations will help SMEs in the UK realise how much choice they have at their fingertips when it comes to services such as lending – whether it’s the traditional players like building societies, digital-only challenger banks, or smaller FinTechs they may not have heard of before.
Over the past few years FinTech has been instrumental in picking up the pieces where the larger banks have failed to deliver, especially in offering finance opportunities to businesses which may not be large enough for high street lenders to consider.
