How has the Alternative Remedies Package shifted the market for SME banking?

The Alternative Remedies Package was designed to rebalance the market for financial services for SMEs. The two main workstreams are the Capability and Innovation Fund (CIF) which has supported the development of wider SME banking capabilities and stronger competition and the Incentivised Switching Scheme (ISS) which encouraged SMEs to move their accounts and loans from Natwest Group to challenger banks.

The report outlines how the landscape of financial services for SMEs in the UK has changed with over 13% of the market for SME banking having shifted away from big incumbents through ISS and the the CIF, with this on track to grow to around 25% by the end of 2025 assuming all CIF targets are met.

A number of organisations have exceeded their public commitments, accelerated spend, reported market growth in customer numbers and two awardees, Starling and ClearBank, have achieved or are near to 7% market share.

The BCR says over 1,173 high quality jobs have been delivered through CIF to support improvements in the provision of financial services to SMEs, with this expected to grow to at least 1,757 by 2025. Many of these roles will be outside of London.

£1.9 billion of private investment has been made to awardees following CIF funding and £250.9m of incentive payments have been made to UK SMEs through ISS to switch their accounts and loans from Natwest Group to challenger banks.

Richard Anderson, BCR chair, said: “Throughout the life of BCR, we have sought to fund initiatives which will make a real difference to competition in the small business banking market – and it is very positive that we are now starting to see the visible impact of this. There are some fantastic success stories emerging through these public commitments and real evidence that awardees are moving the dial on competition in the small business banking market.”

Aidene Walsh, CIF executive director, commented: “Against the backdrop of recently released information that shows that the number of UK SME businesses now stands at 5.6m, it is a tremendous achievement that two Pool A awardees, namely Starling and ClearBank, have achieved 7.2% and 6.7% (across both pools) market share respectively. This recognises the competitive choice they have both created for UK SMEs. As with previous reporting, indeed many of the awardees are progressing really strongly in their business cases with strong examples particularly in the lending, payments and data management space. There are some emerging concerns about competition for talent in a tight market and potential delays on delivery which the awardees themselves are responding to and which BCR is monitoring closely.”