Following FCA approval of a banking license application in November, SME lender Recognise’s banking operations formally launch this morning with four branches in the City, Manchester, Leeds and the Midlands, as well as an app and online platform.
To mark the arrival of Britain’s newest bank, City A.M. sits down with CEO Jason Oakley, a former head of commercial banking at Metro Bank, to find out why he believes that now is the right time to launch a new bank.
It’s just after nine o’clock, Recognise’s website has just gone live and your four branches opened their doors minutes ago, congratulations. We are in the midst of a recession and a pandemic, however, and Brexit is knocking on the door. Why launch a bank now, in what is already quite a crowded and fiercely competitive space?
There was a funding gap before the pandemic started and that will not have reduced since. The difference now is that many of the established players are having to focus on their existing portfolios and have little appetite for new business. [But] the need among small businesses for a responsive, flexible, tailored banking service is so clearly there. If anything, Covid has reinforced the need for businesses to have a bank who understands them, their opportunities and constraints, and a bank that will provide an experienced relationship manager to help them along the way.
Sure, but how do you plan to build a personal and profound relationship with your clients if you are largely an online bank?
Our interaction is actually relationship-led, digitally enabled. Our model incorporates true relationship management enabled by technology, not through a call centre. The closure of bank branches has seen many areas lose experienced bankers who understand local businesses, the community, and the economy. Old-fashioned personal relationships, expertise and continuity of service have become victims of the shrinking branch network. A different type of bank is needed that understands what SMEs really want, focusses on helping them with their challenges and prioritises their requirements.
“We are launching without the antiquated systems, legacy book, historic problems and fundamental baggage that many of the established banks have to wrestle with.“
So, just to specify, how do you plan to do that?
A relationship-led proposition which will be delivered through our relationship managers in London, Midlands, Manchester, and Leeds. They will meet each client and each new prospect will be contacted by an RM, online or in person. Our RMs are members of the local community themselves, so they understand the concerns and pressures specific to the SMEs in their respective locations.
“Too often, SMEs are pushed through to online portals and call centres that automatically reject applications which don’t meet banks’ rigid criteria. This has especially been the case since 2008.“
You mentioned to me earlier that many SMEs in Britain are ‘underserved’. Why do you feel traditional, established banks have let them down?
The economic crash of 2007 was devastating in many ways, but one negative side effect was the erosion of expertise within banks in the SME sector. Good, profitable businesses now find themselves forced to communicate with their banks through call centres, having no dedicated relationship manager. Traditional banking products are often ‘one size fits all’, inflexible and don’t reflect specific business’s needs. Further, businesses will need a decent supply of credit to get through the tough years ahead. We need bankers who are in the community to help their clients. It may sound evangelical, but I really believe this is Recognise’s cause, serving the business customer.
Finally, looking ahead, do you think, in a few years’ time, companies like Google, Facebook and Amazon will take over many traditional banking services?
My sense is there are bigger issues in the world than the provision of banking services to the SME community in the developed world. Almost 31 per cent of the world’s population is still unbanked, so I would say big tech will certainly participate in the overall ecosystem and make financial services more accessible where it is not. We are a long way from where complex products and services such as specialised SME finance are provided to businesses widely by the companies you mentioned. The provision of these are driven by a deep understanding of the client, their business, the ecosystem and the community they operate in.
“The challenge is significant in so many ways. Our journey to a licence spanned over three years, it involved working closely with the regulator to shape our plans.”Oakley on obtaining a banking license from the FCA