Challenger banks land £280m to improve SME banking

Three challenger banks have been awarded grants totalling £280m to improve business banking for small and medium-sized enterprises (SMEs).

Metro Bank, Starling and ClearBank have been awarded grants of £120m, £100m and £60m respectively by the RBS Alternative Remedies package. The money is part of a £775m fund backed by the UK Government and overseen by Banking Competition Remedies, the organisation established to stimulate competition in the banking sector.

Metro Bank said it will use the money to open new stores in the North by the end of 2025, including cities such as Manchester, Leeds, Sheffield, and Liverpool. It will also bring forward “initiatives to introduce a range of game-changing digital capabilities to help SMEs thrive”.

Starling said the funds will accelerate its ability to reshape the SME banking market, further invest in proprietary technology and build out its UK-based customer service and support team. It will launch a web portal for SME banking customers later this year.

Anne Boden, founder and chief executive of Starling Bank, said: “Starling will deliver an advanced fully-digital offering that connects SMEs with the financial solutions they need to thrive. This is the opportunity to bring new technology and a new approach to the sector.”

ClearBank and partner Tide will match the award to drive brand awareness, remove friction to switching and develop propositions to entice customers to move from the big four banks.

“Our partnership with Tide will provide the SME banking market with an innovative and compelling client proposition, using our highly-agile technology,” said ClearBank group CEO Charles McManus.

“We can start work today. The funding will help Tide accelerate its strategy to capture a significant share of the market, and we plan to match this with further investment of our own,” added Tide CEO Oliver Prill.

At the end of February, ClearBank also announced a strategic partnership with fintech firm Oaknorth. The business will use ClearBank’s platform to provide scalable real-time payments and agency banking services. To date, Oaknorth has lent almost £3bn to UK businesses.