Three challenger banks have been awarded a combined £280m from an RBS fund designed to boost business banking competition.
Metro Bank, Starling Bank and ClearBank have all given funds to boost their business account offerings and increase competition in the sector.
Metro Bank received the largest share of the pot despite a recent accounting error in the way it classified loans.
The rest of the £425m capability and innovation fund will be awarded later this year, while a separate £350m incentivised switching scheme was shared among 11 banks at the end of last year and will be reopened for a second round in June.
The BCR said it received applications from six applicant – TSB, Co-operative Bank and CYBG are understood to have missed out, while Santander decided against an application after lengthy consideration.
The fund was a condition of the Government’s £45bn bailout of RBS during the financial crisis.
In the first round of funding, Metro Bank were awarded £120m, Starling Bank £100m and ClearBank £60m, the Banking Competition Remedies (BCR) said today.
Starling said it would use the money to create 400 new jobs in the UK and build its services for SMEs.
The challenger bank said it would also invest £94.8m of its own money and expected to achieve a 6.7 per cent market share within five years.
Chief executive Anne Boden said: “It will accelerate our ability to reshape the SME banking market.
“Starling will deliver an advanced fully-digital offering that connects SMEs with the financial solutions they need to thrive. This is the opportunity to bring new technology and a new approach to the sector.”
ClearBank, through its partnership with business banking provider Tide, said it would “revolutionise” the SME market.
Chief executive Charles McManus said: “Our partnership with Tide will provide the SME banking market with an innovative and compelling customer proposition, using our highly agile technology.”
Tide chief executive Oliver Prill said: “We can start work today. Tide is already the fastest growing business banking service provider in the UK.
“The funding will help Tide accelerate its strategy to capture a significant share of the market, and we plan to match this with further investment of our own.”
BCR chairman Godfrey Cromwell said: “These awards seek to increase competition in the business banking market and to improve the financial products and services available to SMEs.”