Two digital banks will work together for a share of the cash RBS was forced to set aside to promote UK banking competition following its financial crisis rescue.
Challenger bank ClearBank has partnered with digital lender Tide and applied for a slice of Royal Bank of Scotland's (RBS) £775m fund aimed at increasing competition in Britain's business banking sector.
It will be partnered by small and medium sized enterprises (SME) lender Tide, which last month said it notched up 56,000 SME customers, accounting for one per cent the UK’s 5.6m small businesses. Tide, founded in 2014, is chaired by US venture capitalist and Treasury adviser Eileen Burbidge.
The RBS fund is part of European Union conditions attached to its £45bn Government bailout a decade ago at the height of the financial crisis.
They argue that high street banks uniformly offer a slow service with few incentives to the UK’s small businesses. It will allow them to develop advanced business current accounts and products for British SMEs, the firms said.
Tide chief executive Oliver Prill said: “The RBS Alternative Remedies Package is a golden opportunity to inject competition and innovation into the business banking market. Banks have traditionally viewed serving SMEs as a marginal and low-revenue activity, which is why they have terrible customer satisfaction ratings.”
ClearBank group chief executive Charles McManus added both firms shared the same “ambition to revolutionise banking services provided to the SME market”.
Winners of the first round of the fund are expected to be announced in February.
ClearBank’s technology platform is built on a combination of public and private cloud infrastructure, and is specifically designed to handle core banking, clearing and settlement services. The business is ledup by executive chairman Nick Ogden, who is the founder and former chief executive of payment processing giant Worldpay.