Tide joins forces with ClearBank to transform UK SME banking market

We’ve announced today our partnership formed with ClearBank, a next-generation clearing bank, to transform banking for small businesses.

With Tide’s support, ClearBank has applied for a grant from Pool A of the Capability and Innovation Fund that forms part of the £775 million RBS Alternative Remedies Package, a government-backed competition. With Tide providing the customer facing proposition, the partnership aims to take advantage of a once in a generation opportunity to challenge the oligopoly that dominates the UK business banking market.

The bid blends ClearBank’s world-class payments infrastructure and Tide’s unrivalled digital banking platform with the aim of offering a genuine alternative to the high street banks.

If the bid is successful, the funds will be used to tackle barriers to change identified by the Competition and Markets Authority (CMA) in a 2016 report. These include:

  • real and perceived difficulties for SMEs to open a new business current account (BCA). Opening a BCA is typically a lengthy and cumbersome process, fraught with the danger of things going wrong and payments being missed. Only 4% of SMEs switched their business current accounts in the last year, and only 0.4% used the little-known Current Account Switching Service to do so.
  • a lack of compelling attractors to incentivise small businesses to switch. Traditional price and branch-led approaches to competition have to date proved ineffective. The CMA found that “more of the same” business current account offers will not deliver the necessary shifts in market share, and that genuine innovation and value-add services are required to encourage switching. These should assist with solving real-world business problems like access to credit and time spent on administrative tasks, freeing entrepreneurs and firms to focus on growing their business and leisure activities.
  • low awareness of alternative offerings to the high street banks. Large marketing budgets and branch networks have helped incumbent banks to maintain their dominance despite SMEs being increasingly digital and open to digital alternatives. However, Tide has proven that a powerful offering can attract SMEs; in less than two years, Tide has gone from zero customers to one per cent market share of the UK’s 5.6 million UK SMEs, with a new business signing up every eight minutes.

Through our platform, we can overcome these barriers. At Tide we offer our growing army of members business banking without monthly, weekly or annual, or card usage fees. The only costs are for transfers from non-Tide accounts, ATM use and cash deposits at the post office. Unlike traditional banks, a new Tide account can be up and running in as little as five minutes rather than what can be weeks on the high street. As well as balances and payments, the Tide app is an invoicing platform and can be fully integrated into accounting systems. Tide was among the first to launch with Xero’s new bank feed integration.

Oliver Prill, CEO of Tide, said:

“We are delighted to have formed this partnership with ClearBank, who share Tide’s values and ambition to save small businesses time by providing cheaper, more personalised services. Our customers want to focus on growing their own business rather than admin, and that is what Tide is 100 per cent focused on helping them do.

“The RBS Alternative Remedies Package is a golden opportunity to inject competition and innovation into the business banking market. Banks have traditionally viewed serving SMEs as a marginal and low-revenue activity, which is why they have terrible customer satisfaction ratings. Our customers love Tide because we are doing things differently, and a grant from Pool A will allow us to go even further, faster, for UK SMEs.

“Purely from a risk management perspective, it would be a mistake to give all the top prizes in the RBS Alternative Remedies Package to high street banks to do ‘more of the same with’ and upgrade legacy systems. As any investor knows, it’s important to diversify your portfolio and we are the only player with an exclusive focus on SMEs, a cutting-edge technology stack and no costly overheads like branches.

“Tide has already demonstrated its credibility by being the fastest growing business banking service provider in the UK and I very much hope the competition judges, when deciding who to award the grants to, recognise we are not only leading innovation but are a safe pair of hands.”

Charles McManus, Group CEO of ClearBank® said:

“We are delighted to launch this strategic partnership with Tide, a company that shares our ambition to revolutionise banking services provided to the SME market. ClearBank® is committed to improving SME outcomes in the UK by leveraging innovative partnerships with leading technology and financial services providers in accordance with our white label banking model. The agreement with Tide combines two world-class payment platforms, providing an innovative and compelling client proposition, is further evidence of ClearBank® delivering on this ambition and is an example of how we can use our highly agile technology to build strategic business partnerships.”

About the RBS Alternative Remedies Package:

The package focuses on the following two remedies to promote competition in the market for banking services to small and medium enterprises (“SMEs”) in the UK.

  • A £425m Capability and Innovation Fund, to be administered by an independent body, that will grant funding to a range of competitors in the UK banking and financial technology sectors; and

  • An Incentivised Switching Scheme which will provide £275m of funding for eligible challenger banks to help them incentivise SME customers of the business previously described as Williams & Glyn to switch their accounts and loans from RBS paid in the form of “dowries” to the receiving bank. An additional £75m will be made available by RBS to cover customers’ costs of switching.

A competition to get access to the funds started in November. It is administered by Banking Competition Remedy Ltd who were appointed to the role by the government.