Nationwide Building Society today celebrates “good news for small businesses” as it was announced the world’s biggest building society has secured £50 million funding to enhance its entry into the business banking market.
The Society is the only major high street provider currently not to offer a business current account and aims to shake up the market as it focusses squarely on supporting the UK’s 5.6 million small enterprises.
The Society, which was founded for a social purpose, is owned by and run for the benefit of its members, not shareholders. This means the Society can often take a longer-term view and focus on both our service and returning more value to its members. It will inject much-needed competition into a market in which 85 per cent is dominated by five big banks and where switching levels are low, despite the view that many are being underserved1. The proposition will meet the straightforward needs of businesses, offering a fair value current account with market-leading service and a nearby branch.
The Capability and Innovation Fund grant2, administered by Banking Competition Remedies Limited (BCR), will be used to enhance the Society’s plans to deliver a fully-fledged business banking proposition including unsecured loans, credit cards and savings - providing the best of branch and digital service and access to dedicated UK-only call centres. It will also be used to develop a suite of associated products and services aimed at making the lives of business owners easier, from support with accountancy and cashflow to assistance with foreign payments. Nationwide has outlined its approach on the Banking Competition Remedies website through its public commitments.
The Society hopes to attract an estimated 340,000 customers in the next five years, including 125,000 business current accounts switching to Nationwide. Up to a million of the Society’s members are understood to own businesses. The Society receives 50,000-plus enquiries each year looking for help with business banking needs.
Nationwide will provide specialist training for its 7,000 branch-based colleagues, as well as recruiting for 400 new job roles based throughout the UK, including at the Society’s head office in Swindon, Wiltshire.
The Society committed to launching a business current account last year, irrespective of whether it received funding. Earlier this year, Nationwide announced a £15 million deal with established British fintech 10x Future Technologies to deliver a state-of-the-art digital platform that will match its leading branch service.
Joe Garner, Chief Executive of Nationwide Building Society, 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 £50 million 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.”
Notes to Editor:
1 Currently, due to a lack of alternatives, just 4% of SMEs a year switch providers, despite around half of SMEs not rating the service they receive as ‘very good or excellent’.
aSource: CMA Report 2016 (p243) see here This will open a PDF document which may open in a new window (depending on how your browser is set up)
bSource: CMA Report 2016 (p29) see here This will open a PDF document which may open in a new window (depending on how your browser is set up)
2 Capability and Innovation Fund - The purpose of the Capability and Innovation Fund is to encourage eligible bodies to (i) develop and improve their capability to compete with RBS in the provision of banking services to SMEs; and (ii) develop and improve the financial products and services which are available to SMEs. The Capability and Innovation Fund comprises a total of £425 million which is divided into four pools. The four pools each have a distinct purpose and are divided into a number of pre-determined grants.
Further details of the commitments made by Nationwide are available in the CIF bid outcome news release, available here (This link will open in a new window).
