Providing the perfect remedy

After years of headlines highlighting the lack of options for credit-hungry SMEs, small business lending is now going from strength to strength.

The flow of finance to small businesses is strong, despite continued uncertainty about Brexit and the wider economic environment. The British Business Bank found that gross bank lending to smaller businesses averaged £14.4bn per quarter in 2018. This figure is likely to rise in 2019, with BCR one of the major drivers. It’s having a real impact on this economically-vital group.

BCR, or Banking Competition Remedies Limited to give it it’s full title, was established post-financial crisis to implement the Alternative Remedies Package of measures, which was carefully created in collaboration between the UK Government and the European Commission to boost the prospects of underserved SMEs.

And importantly, it’s completely independent from the UK Government. BCR is governed by an independent Board of Directors, chaired by Lord Cromwell. It’s mission is simple really: to widen choice in business lending.

Spreading the love

It’s main responsibilities include providing information to applicants of both the Capability and Innovation Fund and Incentivised Switching Scheme, and then managing and disbursing the vital funds to chosen lenders.

Fund allocation is segmented into three categories: capability, innovation and current account switching incentives. Earlier this year, the Pool A winners were announced – with £280m in funding awarded to digital and challenger banks, specifically Metro, Starling and ClearBank.

But what’s perhaps more interesting is the recent announcement of the Pool B winners. BCR has awarded a considerable pot of £50m to Nationwide, Britain’s oldest mutual mortgage provider founded in 1846, and £15m each to Investec and Co-operative Bank.

The £50m sum for Nationwide will enable the lending giant to ‘change the face of SME banking’ in the UK with the launch of its business current account in early 2020. Co-op will use the funding to modernise its digital service for SMEs, develop products and implement personalised business support services to help small businesses thrive and increase the speed of banking for SMEs. Co-op also boasts a particularly strong regional presence, ensuring that the whole of the UK benefits.

BCR has so far chosen a good mix of traditional branch-based lenders and new fintech entrants. This is great news, as it means that the whole spectrum of business lenders, and therefore their customers, will benefit from this initiative.

Driving digital transformation in lending

Innovation is an area that has, until recently, been rather lacking in the SME lending space. But now, thanks to Lending-as-a-Service (LaaS) providers, it’s rife.

If they are used wisely, these BCR funds will enable a wide range of lenders to take a considered, objective look at the way they conduct their business and redefine what they need from the technology and the processes that underpin their market proposition.

These financial institutions will have the option to partner with the new wave of LaaS providers in order to implement a complete end-to-end digital lending solution. The best LaaS companies have the ability to closely work with a bank’s existing systems to configure a solution that meets their unique needs – because everyone is different.

Banks and other financial institutions are best off starting with online customer acquisition and onboarding, which is becoming the most critical part of the customer service equation, and then moving on to automated decisioning to keep the customer engaged and satisfied. At ezbob, we’re working with some of the biggest names in the lending business, providing a comprehensive suite of modular lending applications, all running under one roof. This enables them to offer customers a truly digital lending proposition, completely customised to their requirements.

It’s great to see BCR making inroads into the small business financing space. The funds should result in improved services across both traditional and new lending providers, and SMEs will have the ability to access loans faster and at considerably better rates. And Pools C and D are still to come.