August 15, 2019

£425m handed out and dozens of promises to improve small business banking

But will these make a real difference?

Maija Palmer

4 min read

Small businesses in Britain should soon be spoilt for choice when it comes to banking. Why? Because 15 challenger banks and fintech companies have now received a total of £425m which must specifically be used to create better banking services for small companies.

The money comes courtesy of Royal Bank of Scotland — and the taxpayer — in a manner of speaking. A decade ago when RBS bank was bailed out by the UK government, European state aid rules required that a portion of the bailout money be distributed to banking challengers to improve SME banking. It’s taken a while to make the grant decisions but the Banking Remedies Commission has been duly dripping out the money since the beginning of the year.

The last tranche — £40m — was awarded this week to Iwoca (the fintech company focused on small business lending), Currencycloud (global payments platform), Modulr Finance (offers digital payment accounts) and Atom Bank (challenger bank), with each of them promising to make more of their services, whether it be loans, business finance or cross border payments, available to SMEs.


Things have not started well for this programme, with startup Metro Bank embroiled in an accounting irregularities investigation soon after being allocated the money, and some potential conflict of interest questions for challenger bank Starling Bank. But perhaps it will get better from here.

Photo of Oliver Prill, CEO of UK SME bank startup Tide.
Oliver Prill, CEO of UK SME bank startup Tide, which is partnering with ClearBank.

Many of these company pledges sound like they will use the free money for things they would have done anyway: develop products they were already working on (Modulr Finance building its digital payments system, Fluidly developing its cashflow management software, Form3 building a global transaction platform, for example) or to sign up more customers (in the case of new clearing bank ClearBank and The Co-operative Bank).

But given that small business is one of the more neglected customer segments in the banking world, perhaps it is worth speeding up some of these projects.

  • Read our comparison of startups offering small business banking here.  

It may be worth checking out the financial institutions that have specifically promised to increase lending to small businesses: Starling, Investec, Iwoca, Atom Bank and Funding Options have collectively promised close to £10bn worth of lending to SMEs over the next few years.

If you’re a small business, these are the doors to knock on. It’s worth remembering that BRC money comes with strings attached: if these fintech companies don’t do what they promised, these funds can be clawed back. Let’s keep them honest.

The pledges:

Metro Bank (£120m) —will open more branches in the north of England and create a fully-digital offering for SMEs.

Starling (£100m) — will make £913m of lending available to business customers by the end of 2023, and launch an online portal for its 59,000 SME account holders (which have doubled since the company applied for the grant) by the end of 2019.

ClearBank (partnered with Tide) (£60m) — wants to achieve at least 8% market share in the business current account market by 2023, giving the big banks a run for their money.

Nationwide (£50m) - will launch a business current account in 2020, with plans to have 340,000 small business current account customers by 2024.

Investec (£15m) -— will provide £300m of additional lending to small firms and “directly support” more than 8,000 small businesses through “lending, deposits and other banking products over the next five years”.


Co-operative Bank (£15m) — will boost its small business banking market share to 5% by 2025 from 2.3% currently.

Iwoca (£10m) — will make £5bn worth of lending available to 150,000 SMEs by 2023.

Atom Bank (£10m) — will make available £3bn of business financing by March 2024.

Currencycloud (£10m) — will enable 10% of UK SMEs to access cross-border payments by 2024.

Modulr Finance (£10m) — will speed up the development of its dashboard that helps accountants manage payments for SMEs.

Funding Options (£5m) — will fund an additional 10,000 small firms with around £500m in alternative lending by the end of 2022.

Fluidly (£5m) — will speed up the development of its cashflow management software and connect 400,000 small firms to its technology by 2022.

Codat (£5m) — will get a minimum of 100,000 small companies using its software for sharing financial data.

Form3 (£5m) — will build a global transaction platform for SMEs real-time services will be rolled out to “at least” 690,000 small firms by the end of 2023.

Swoop Finance (£5m) — will help 162,000 firms to open additional accounts to perform faster payments or deposits, generating £243m in savings.