The Daily Telegraph reported Sunday (Sept. 30) that digital and financial service startups claim they are unfairly kept out of competition for the $1 billion made available by the government via a deal with RBS. The bank is required to dole out the funds as concessions for keeping its subsidiary Williams & Glyn; regulators want those funds to be used by competitors to promote bank switching and industry competition.
Tide told the publication that the requirements the U.K. government has placed on banks to compete for some of those funds are too strict, and may actually stifle competition by keeping eMoney companies out of the running. Regulators have allocated 10 percent of the funds for FinTech firms, but according to Tide, that’s not enough.
“Expanding the package’s eligibility will make the most of the once-in-a-lifetime opportunity to shake up [small business] banking by introducing real competition,” said Tide CEO Oliver Prill in a statement. “Opening up to the U.K.’s growing FinTech sector will offer businesses an unparalleled choice to try out innovative alternatives tailored to their needs after years of being underserved by the high street. Without this change, the oligopolistic structures that have served small businesses so poorly in the past are likely to persist.”
According to reports, while 10 percent is allocated to FinTech firms, Tide argued that key parts of the package are only open for players authorized by the Prudential Regulatory Authority, including banks like Santander and TSB Bank. Prill said this structure may actually reinforce leading banks’ existing market advantages.
RBS first began readying to issue the funds earlier this year via the Banking Competition Remedies body, an independent group established to manage the payouts.
Nationwide, TSB Bank and challenger bank Starling are some of the financial institutions (FIs) expected to apply for funds, as is CYBG, which announced plans to acquire Virgin Money for $2.2 billion earlier this year.