U.K. challenger banks Tide and ClearBank are teaming up to apply for a portion of the $1 billion made available by Royal Bank of Scotland (RBS) to promote banking competition, Tide announced Monday (Jan. 14). Together, Tide, which targets small and medium-sized businesses (SMB) with its financial services, and clearing bank ClearBank have applied for a portion of the Pool A funds of the Capability and Innovation Fund, part of the RBS Alternative Remedies Package.
The package of $1 billion was allocated by RBS as a part of government requirements to remedy any competition concerns related to RBS’ bailout, and was agreed upon as an alternative to requiring the financial institution (FI) to give up its Williams & Glyn subsidiary. Last month, reports said 11 banks have been granted access to a combined $443 million worth of the RBS fund, described as “very good news” by Banking Competition Remedies, which is overseeing the program.
However, the initiative has also garnered criticism, most notably from FinTech firms that argued non-bank institutions should be allowed to compete for the funds. Last October, Tide urged the government to allow those players to enter the race, with Tide CEO Oliver Prill stating that the funds are a “once-in-a-lifetime opportunity” to disrupt the SMB banking market.
Now, through a partnership with ClearBank, Tide appears to have found its way into the running for the RBS funds.
“The RBS Alternative Remedies Package is a golden opportunity to inject competition and innovation into the business banking market,” Prill said in a statement Monday.
He continued, “Purely from a risk management perspective, it would be a mistake to give all the top prizes in the RBS Alternative Remedies Package to high-street banks to do ‘more of the same with’ and upgrade legacy systems.”
Their collaboration combines Tide’s digital SMB banking platform with ClearBank’s payments infrastructure. The companies said that any funds awarded to them from the RBS package will be used to address the points of friction that the U.K. Competition and Markets Authority highlighted in a 2016 report, including the difficulties faced by SMBs to open new current accounts, a lack of competition in SMB banking and a lack of awareness among small businesses to high-street alternatives.