Nationwide Building Society is one of three UK lenders to be awarded grant money to develop their business banking services, drawing £80m from a fund created as part of the Royal Bank of Scotland’s government bailout.
Nationwide secured a £50m share of the Pool B stage of the Capability and Innovation Fund, while Investec Bank and the Co-operative Bank each took home £15m.
The fund forms part of the Alternative Remedies Package, which consists of a £425m reserve to be allocated in four stages to eligible challenger banks looking to improve their banking services, and better serve the 5.6 million SMEs in the UK.
Godfrey Cromwell, chairman of Banking Competition Remedies (BCR), the organisation tasked with overseeing the allocation of the funds, said: “Pool B is the second group of grants from the Capability and Innovation Fund aimed at increasing competition in the UK business banking market with the overall purpose of improving financial products and services available to SMEs.
“We look forward to these organisations delivering on their public commitments and to further announcements for Pools C and D in the coming months.”
Nationwide Building Society pockets £50m grant from the Capability and Innovation Fund Pool B
Each portion of the Capability and Innovation Fund has been designated for specific purposes, with Pool B aimed at helping firms either modernise a legacy business banking product, or launch a brand new offering.
Nationwide, the biggest reward recipient, does not currently provide a business current account, and intends to use the grant to fund its entry into the SME market, with plans for unsecured loans, credit cards and savings.
It hopes to attract around 340,000 customers in the next five years, including 125,000 business current accounts switching from other providers.
Nationwide CEO Joe Garner said: “This is good news for small businesses. The fund gives unprecedented opportunity to accelerate plans and inject competition into this market.
“As a building society, we are in a unique position as the only mutual with the scale, trust and track record to offer a compelling alternative to the banks.
“While the money is a massive boost for our plan, we also aim to match every pound of the £50m award with our own funding over a five-year plan.
“As a mutual organisation driven by our social purpose, it is important that business owners are given more choice to find an account which suits their needs and we look forward to delivering this proposition.”
BCR received 13 applications from ten individual applicants during the Pool B application process, which ran between 1 February and 29 March this year.
Recipients of the Capability and Innovation Fund
In February, the first – and biggest – stage of grants from the Capability and Innovation was handed out, with Metro Bank awarded £120m, challenger bank Starling taking £100m and a partnership between ClearBank and Tide receiving £60m.
Two further pools remain to be apportioned, with applications currently being accepted for both.
Pool C consists of four individual grants of £10m for improving the process of making payments and lending, while Pool D has five grants of £5m available and is open to banks broadly looking to commercialise financial technology.
