Challenger bank Starling issues warning about carve-up of RBS fund

Anne Boden, Chief Executive of Starling Bank, has today criticised the Treasury over its decision to allow big banks like Santander to bid for millions of pounds of funding from the Royal Bank of Scotland fund designed to boost competition in the SME business banking market.

Writing in City AM, Boden said: “Banks such as Santander, Clydesdale and TSB are all signalling their intent to bid for some of the largest awards. If they are awarded money from the RBS fund, an important opportunity to really disrupt the market by channelling the money to the new generation of startup, or challenger, digital banks, will have been lost. Santander has £300 billion, TSB £42.5 billion and Clydesdale £43.2 billion. Even the largest award of £120 million will have little impact on banks that have attained this mass.”

Banks with assets up to £350 billion in the UK are eligible to bid for the fund but this may only serve to undermine the ultimate goal of the fund which is to cut RBS’s market share and stimulate competition away from established high street banks.

Boden goes on to say: “The RBS fund has a chance to help truly disrupt the market by supporting real innovators. Because they are starting from scratch, building their own proprietary technology from the ground up and based on consumer needs, they can deliver more with certainty at a lower cost and in less time.

“They can give SME customers accounts that can be opened in a matter of minutes without the traditional bureaucratic trappings of business banking which favours bigger companies. But there remains a risk that it could merely further entrench the big players, at the cost of entrepreneurs and small business owners.”