Business banking in the UK is about to get interesting, with the UK Government announcing a proposed radical new plan for the Royal Bank of Scotland (RBS) to fund a series of initiatives that would generate competition in the marketplace and provide better accessibility to funding for SMEs.
The proposed package includes a fund that supports eligible challenger banks to enhance their business banking capability, which in turn, will support their drive to get more SME clients on-board by switching from the RBS. The RBS will also provide access to its branch networks to customers of challenger banks, to provide an easy transition when SME customers switch between providers. A separate fund has also been proposed to invest in financial technology.
What is the public interest of this plan? For starters, SMEs will have more choice between financial providers when accessing finance, which will be a huge opportunity, especially for those who are wanting to enter the hyper-growth phase of their business cycle.
To implement a blueprint for banking competition like what has been proposed by the UK Government would blow the playing field between challenger banks, the growing fintech ecosystem and the established banking sector wide open.
Why would the Royal Bank of Scotland come to the party and support disruptive competitors? Well it is in response to a legacy commitment given to the European Commission as part of the state rescue package that saved them during the Global Financial Crisis.
What if the Australia Government found a way to motivate the Australian banking oligopoly to open up banking? There would be an obvious backlash from the Big Four, as such a plan would undermine their dominance that has ruled supreme for so long. Yet it would be a day to rejoice for digital challengers such as Tyro and the many new fintech start-ups who have long called for policy changes to be made in the banking sector to free up competition and to provide SME consumers with more flexibility in who they choose to bank with.
I’ve said this time and time again – the Australian banks fail to serve the SME community well. Imagine how many more jobs, products and services could be created by SMEs if banking supported them? Imagine the increase in the number of SMEs turning into hyper growth innovators just from having the available funding afforded to them? Imagine how many more Tyros could hit the market if the Australian Government provided funding pools and effective policy-enablers that allow fintechs to compete?
This plan, if it goes ahead, will be a game-changer not only for challenger banks in the UK, but also for SMEs looking for banks that will give them a fair go. The Australian Government should sit and take note of the steps that their UK counterparts are taking, because this is such an opportunity for our market. SMEs, in future, could be calling the shots on who they choose to bank with and this is a culture shock that the Australian banking sector is in desperate need of.
To read more about the UK Government’s RBS announcement, please click here: https://www.gov.uk/government/news/uk-government-proposes-new-approach-to-boost-banking-competition-and-resolve-rbs-state-aid-commitments