The challenger banks have won a grant worth a combined £280m, with Metro taking largest share with £120m, followed by digital-only bank Starling with £100m and ClearBank, which applied for the grant with partner Tide, taking £60m.
RBS's £775m alternative remedies package was set up as one of the conditions attached to its £45bn government bailout at the height of the financial crisis and the cash is being distributed by the Banking Competition Remedies (BCR) body.
The £425m capability and innovation fund is aimed at helping bidders develop their current account, lending and payments offerings for business customers.
Godfrey Cromwell, BCR's chairman, said: “These awards seek to increase competition in the business banking market and to improve the financial products and services available to SMEs.”
Starling has pledged to use its grant to create nearly 400 new jobs in the UK and to invest £94.8m of its own money to bolster its offering to SME (small and medium-sized enterprises) customers.
It said that will make £913m of balance sheet lending available to SME customers by the end of 2023 and that aims to capture 6.7 per cent of the business banking market within five years.
Anne Boden, Starling's founder and boss, said the grant will “accelerate our ability to reshape the SME banking market”.
“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,” she said.
Craig Donaldson, CEO of Metro Bank, said the grant “allows us to accelerate our plans to revolutionise banking for SMEs”.
“It will help us bring much needed competition to the underserved SME hotspots in the north, while investing in our digital capabilities and creating new jobs,” he added.
ClearBank, the first clearing bank to launch in Britain for 250 years, teamed up with SME specialist platform Tide to apply for the grant.
Tide's chief executive Oliver Prill said the grant will help the company grow market share and that it will match the grant with further investment of its own.
Additional reporting by wires
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