In the final round of Capability and Innovation Fund awards, Atom Bank and iwoca are among four firms to be handed £10m to boost UK business banking

Atom Bank

Atom Bank was awarded £10m to improve SME banking in the UK (Credit: Atom Bank)

Atom Bank and iwoca were among the winners of individual £10m ($12m) grants awarded today from a fund designed to improve small business banking in the UK.

The pair, alongside Modulr Finance and Currencycloud each received capital to ‘facilitate the expansion of business offerings’ to SMEs in the UK, including lending, payments and international transfers.

The £425m ($514m) Capability and Innovation Fund (CIF) was created as a condition of the government bailout of the Royal Bank of Scotland in 2008.

These latest awards were given as part of its Pool C allocation and complete the distribution of the entire fund, with separate grants having been awarded earlier in the year.

Godfrey Cromwell, chairman of Banking Competition Remedies (BCR), the group tasked with allocating the grants, said: “Pool C centres on lending and payments services to SMEs. The four selected organisations address these areas and complete our portfolio of CIF grants.

“Now the emphasis is on monitoring each recipient’s reporting and deliverables. Their public commitments can be seen on our website, and performance against these will be regularly updated there.”

A total of 76 submissions for Pool C funding were handed to the BCR during the application window, which ran from the start of May to the end of June.


Atom Bank will invest £15m of its own money to improve UK business banking

Challenger bank Atom, which was founded in 2014 as a fully-digital alternative to high street lenders, was one of the four firms chosen for this latest CIF funding — adding to the £50m ($60m) it picked up in venture funding at the end of last month.

It currently offers a range of products centred on loans, mortgages and savings. Atom claims to have already lent more than £200m ($242m) to UK businesses.

The firm has pledged to invest £15m ($18m) of its own money into improving SME services to accompany the grant and expects to create 70 new jobs at its headquarters in the North East of England.

atom bank business
Atom Bank expects to create 70 new jobs at its headquarters in the North East of England (Credit: Atom Bank)

Atom CEO and co-founder Mark Mullen said: “As a fast growing new entrant we know just how hard it is to get a business off the ground, and we recognise that the needs of smaller businesses are different from those of larger firms.

“We are delighted to receive this award and we will provide SMEs with a truly digital offering that allows them to get on with the day-to-day running of their businesses, giving value back to customers and bringing some much needed competition to the business banking market.”

Part of Atom’s strategy for the CIF grant is to develop a range of digital-first lending products that will “provide small businesses with clarity on their financial health, reduce barriers when applying for finance, and give them more confidence to focus on growth”.

It says it will make available an additional £3bn ($3.6bn) in business financing and hopes to attract around 340,000 new SME customers by March 2024.


Business lender iwoca joins Atom Bank in Pool C selections

SME lender iwoca also picked up a £10m ($12m) grant from the fund, to which it will add £13m ($16m) of its own capital to support the growth of its business banking proposition in the UK.

The fintech aims to increase the size of its customer base to 150,000 small businesses by 2023, while making £5bn ($6bn) available to them in loans.

Earlier this year, the firm identified a £10bn (12bn) “funding gap” in the market for small businesses in the UK, caused by a shortage of relevant finance and difficulty accessing it.

A key aspect of iwoca’s strategy for improving SME banking services will include its OpenLending platform as well as a partnership with accounting fintech Xero.

CEO and co-founder Christoph Rieche said: “Winning this grant is a huge milestone for us.

“iwoca is the only SME lender in the UK with the scale, level of experience and technology to dramatically expand and transform access to finance for small businesses.

atom bank business
iwoca co-founders James Dear and Christoph Rieche (Credit: iwoca)

“Our proven track record of industry firsts includes integrating with eBay and Amazon, being the first business to offer a Lending API, and the first SME lender to integrate with open banking.

“Winning the grant enables us to accelerate our mission to make finance available to one million SMEs.”


All £425m of CIF capital has now been allocated

Modulr Finance and Currencycloud were the other two firms to share the Pool C grant, each chosen based on their public commitments for how the money will be used to improve the business banking landscape in the UK.

Both provide payments services to businesses — an important aspect of running any small company — and between them will offer better ways of conducting both domestic and international money transfers.

Like Atom and iwoca, each firm has agreed to invest capital of its own to accompany the financing provided by the CIF grants — £30m ($36m) for Currencycloud and £10m ($12m) for Modulr Finance.

Now the entirety of the £425m ($514m) available in the CIF has been allocated, the BCR will monitor the progress of recipients’ strategy and adherence to its public commitments, with quarterly updates to be published on its website.