By Andrew Wright, Vice President, Financial Services, Publicis Sapient

It’s over two months since the UK’s Banking Competition Remedies (BCR) announced that £100m funds handed back by Metro Bank and Nationwide Building Society would be redistributed as a series of grants ranging from £2.5m to £35m.

The controversy surrounding Metro’s top award and Nationwide’s U-turn are well publicised. Neither felt able to deliver on their promises and have returned taxpayer-funded, RBS bail-out monies. This is a blow to beleaguered UK SMEs and a further kick-in-the-teeth to previously unsuccessful applicants. It’s also an opportunity for others.

The market has been relatively quiet on who might apply and what they’ll propose to help drive choice and innovation in the SME sector. This is no surprise. Amounts are smaller than before and health, economic and societal issues are demanding attention.

But the remedies scheme could still play an important part in relieving pressure on SME’s. In recent weeks, previous winners Starling announced they’d re-apply to build on their 3% market share.  Tide – on track to grab 8% share by 2023 – in partnership with ClearBank, have thrown their hats in again. A tie-up between Trade Ledger and Equifax may also be compelling for SMEs and lenders alike.

These technology led organisations – together with other past winners such as Atom, iwoca and Fluidly – are rapidly becoming household names.  With some justification, one-time disruptors now claim to be safe pairs of hands. Genuine choice focused on customer outcomes and driven by advanced technology and engineering practices is finally emerging.

Two years ago, the Big 5 banks held 85% share and whilst SMEs voiced frustrations about access to credit, costs, service and lack of innovation, few looked elsewhere. Switching rates were low at 4%. There was little choice but to stick with branch offerings, underpinned by decades old infrastructure and technology. No longer. SME banking has long passed its digital tipping point and Covid-19 has highlighted the criticality as the scramble for mobile and online access to information and short term-liquidity continues to expose huge cracks in out-dated services.

Censuswide research¹ shows four in ten businesses plan to change banks due to their experience throughout the pandemic. The digital reset has been super-charged.  Transformation is imperative for those who want to support SMEs and minimise the risk and exposure – not least to a reported £35 billion of COVID-related, unsustainable debt – of doing so.

So what can we expect from remedy applicants? And what difference could they make to SMEs?

Previous winners will pitch to enrich functionality and broaden offerings to scale-ups and complex mid-corporates. They’ll argue further cash injections will enhance experience, accelerate growth and have a more immediate impact on UK plc. They’ll emphasise digital delivery and support, next-gen technology and security, and highlight progress against BCR commitments, lowering the perceived risk of being selected again. If successful, the remedies may help rebalance the market, creating the strong digital alterative SMEs have needed for years.

Newcomers will showcase build capability to improve speed to market and accessibility. 24-7 support (live chat with bots or humans, phone, video) will feature heavily. Some will address specific product frustrations, for example digitisation and democratisation of trade and working capital and there’s no doubt that insurance products will make it into several submissions.

Many will emphasise Open Finance and API connectivity to an ecosystem of value added services and insight through integrations with third-party book-keepers, tax and invoice finance specialists.  Anything that allows businesses to see and interpret cash flow, smooth inventory and optimise balance sheets to navigate uncertain times should be looked upon favourably.

Advanced data science techniques including Machine Learning and Artificial Intelligence will dominate. Applicants will wax lyrical about the benefits of predictive analytics, tailored insight and automation, and rightly so. It has a huge role to play in predicting creditworthiness, speeding-up decisions and fulfilment whilst lowering loan rejection rates and helping providers monitor and respond to the looming debt crisis.

And what about the BCR? How will it boost credibility and funnel investment into sustainable, long term alternatives for UK businesses?

Job creation, regional diversification and physical footprint will arguably be less important than before. Digital capabilities, in particular access to relevant financing and working capital products will be key.

Rigour of analysis and believability of scalability and uptake projections will be scrutinised.  The under-fire BCR needs assurance that forecasts are sustainable and that applicants can deliver at pace to meet market commitments and restore its reputation.

The BCR must be brave. It can’t please everyone and shouldn’t forget that its role is to disperse grants to stimulate choice and drive market innovation.  With a balanced approach to the awardee portfolio the scheme could help relieve the near-term pressure on businesses and leave a lasting impact on the UK market.