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The first group of companies that were successful in securing a share of the Capability and Innovation Fund (CIF) — funded by the Royal Bank of Scotland (RBS) as a condition of its financial crisis-era bailout — was announced last month.
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Two of the winners, Tide and Starling Bank, have now revealed their next steps to better serve businesses.
Here’s what we know about Tide’s and Starling’s future ambitions so far:
- Tide bets on securing more funding to increase its market share. Neobank Tide, which solely focuses on business banking, plans to raise additional £60 million ($78 million) in capital, matching the funding it recently secured from the CIF, per Finextra. To secure the additional funding, Tide aims to raise Series B and C funding rounds over the next two years. The funding will be used to drive awareness for Tide’s brand, and to facilitate switching bank providers, as well as to build new services including payroll tools and expense cards. Having a total of £120 million ($156 million) will likely help Tide in its ambition to secure a market share of 8% by 2023, up from its current share of 1.2% with 70,000 customers, per Finextra.
- Starling plans to open a new office focused on business banking. UK neobank Starling aims to open a second office in Southampton, marking its first office outside of London, according to TechCrunch. The firm plans to recruit 50 software engineers and 100 customer service team members, and the new office will focus on Starling’s business banking product. Starling chose Southampton due to the city’s high level of tech talent and support by the University of Southampton; the startup will likely face less competition in attracting talent in Southampton than London. With the help of its recently secured £100 million ($130 million) chunk of the CIF, Starling will likely be able to rapidly increase its business client base from its 30,000 current business accounts.
Business accounts from the likes of Tide and Starling will likely see high demand, which should worry incumbents. Fifty-nine percent of small- and medium-sized businesses (SMBs) in the UK don’t think that their current offerings are tailored to their business needs, according to a study from Adaptive Lab and Research Now.
Additionally, 56% of respondents don’t trust big corporations to understand the challenges of running a small business. Therefore, incumbents need to find more innovative ways to better serve this group of companies if they don’t want to risk losing market share to new entrants like Tide and Starling.
Moreover, with 55% of SMBs being willing to pay more for services that would free up their time, per the same study, incumbents may miss out on a valuable source of revenue, while neobanks will be able to capitalize on this opportunity with their new services, including accounting and invoice offerings.
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