Royal Bank of Scotland is trialling two standalone digital banks under its NatWest brand, as the lender mulls whether to launch a raft of online-only products to market.
A senior source at the lender told the Press Association that a handful of SME customers are now testing one of the standalone banking platforms aimed at business banking clients.
It is understood that the lender’s chief executive in charge of commercial and private banking, Alison Rose, is overseeing the SME banking trial project, which falls under its NatWest brand.
RBS is also trialling a separate digital NatWest retail bank that would serve everyday customers, with both projects among a number of online banking programmes currently under development.
It is unclear how soon either project could hit the market if approved.
The lender’s decision to trial the two standalone banks under the NatWest, rather than RBS brand, follows new rankings from the Competition and Markets Authority showing RBS coming last out of 14 banks on overall service quality on business banking.
NatWest, in comparison, came sixth.
Reports emerged earlier this month that HSBC is working on its own digital bank for businesses banking, which could launch as early as this year.
It was also reported that that digital challenger Starling was helping RBS with a secret project to build a standalone bank.
If RBS’ product gets the green light, it would help modernise the lender’s offering just as smaller challengers prepare to woo business customers away from RBS.
The likes of Metro Bank, TSB, CYBG, and Starling are expected to bid for a portion of a £775 million fund meant to promote competition for banking services to small and medium-sized enterprises.
The cash comes from RBS as part of conditions attached to its £45 billion Government bailout during the financial crisis and replaced plans for the lender to sell off a portion of its ts SME banking business.
RBS is still trying to shake-off a poor reputation in business banking, with its now-defunct Global Restructuring Group (GRG) having been accused of pushing firms towards failure in the hope of picking up assets on the cheap.
But the lender was recently let off the hook in a recent ruling by City regulator the Financial Conduct Authority (FCA).
The FCA concluded last month that GRG’s activities were not within its remit, and that action against senior management in the GRG for lack of fitness and propriety “would not have reasonable prospects of success”.
But the GRG issue has been revived by the SME Alliance – a small business group that lobbies for fair treatment by banks and advisers – which is launching its own probe into GRG’s actions.
RBS is still around 62% owned by the taxpayer following its bailout, but the Government has committed to selling down its stake in the coming years.
A digital push among UK banks has gained speed as more nimble challengers continue to gain market share.
Legacy digital infrastructure has been a major issue for big incumbents like RBS, increasing the attraction of launching standalone banks with technology built from scratch.
IT issues complicated RBS plans to spin off a portion of its SME banking business as Williams & Glyn, resulting instead in the £775 million pot to fund banking competition in the UK as part of its state bailout conditions.
Challenger TSB – which was spun out of Lloyds Banking Group – felt the full force of IT failures earlier this year when it tried to finally move off of Lloyds’ IT platform onto a new one developed by its Spanish owner Sabadell.