Monzo, the digital banking start-up, has been forced to put the brakes on its plans to roll out a corporate account offering, after failing to win part of a Â£ 80million public grant.
The Board of Directors of Banking Competition Remedies, the body responsible for delivering Â£ 775million in RBS funding to businesses serving small businesses – a legacy of the bank’s crisis-era bailout – has awarded its Â£ 50million first prize to Nationwide Building Society, with Investec Bank and The Co-operative Bank each receiving Â£ 15million, on May 14.
The awards are the second upcoming round of its âCapacity and Innovation Fundâ. Recipients of the first, announced in February, received larger amounts, with fintech companies winning big. Ailing challenger Metro Bank received Â£ 120million, Starling Bank received Â£ 100million and ClearBank and Tide took home Â£ 60million in a joint prize.
Monzo, who has so far focused on consumer checking accounts, previously said that a large subsidy would allow him to speed up plans to launch a commercial equivalent of his flagship product, paired with a credit card. “warm coral” color.
A spokesperson said Financial news: âAlthough we are disappointed that we were not successful in this application, we are still excited to create a financial control center for small and medium businesses.
However, a gain from the BCR fund would have enabled Monzo to considerably expand its investment banking activity. He planned to “hire new people who can research, design, create, test, launch and market business bank accounts,” according to a blog post last November.
The bank added, âIf we don’t get the money, business banking will be a longer term project. “
Monzo’s spokesperson said the bank still hopes the new service will be widely available by the end of the year. A few hundred customers are already using it for testing.
RBC’s selection process has come under heavy criticism in recent months. In March, MP Nicky Morgan, chairman of Parliament’s Treasury Committee, asked him about how Metro Bank won the top prize just weeks after exposing a Â£ 900million accounting error that precipitated a sharp drop in its share price.
Allegations of conflict were also made against Aidene Walsh, the agency’s executive director, for working alongside Starling Bank boss Anne Boden at Dutch bank ABN Amro.
This despite the fact that Starling Bank wrote to the chairman of the committee, Lord Godfrey Cromwell, declaring the connection at the time of Walsh’s appointment, as reported by The Times.
With fintech firms faring worse in the second round of grants, an industry executive suggested that the lobbying efforts of larger banks that were “looking to lose” in the first round could be to blame.
âIt is disappointing to see these big banks getting money to increase competition,â he said.
The Standard Eveningrecently reported that besieged lender TSB Bank had moved away from the BCR program, with insiders calling it “shambolic.”
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