Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
UK Banking Competition Remedies, Lessons for Fintech Growth
Competition | Dec 19, 2024
Image: Pixabay/geralt
How the UK's Banking Competition Remedies Program (BCR) Boosted Fintech Growth
What happens when a government takes bold action to increase competition in its banking sector? The UK’s Banking Competition Remedies program offers a fascinating case study. Both the UK and Canada face similar challenges with highly concentrated banking sectors dominated by a few major players. In Canada, the "Big Six" banks controlled 93% of banking assets in 2023, while in the UK, the 'Big Four' control 85% of UK business accounts and 75% of current accounts.
The result is a lack of competition, stifling innovation, higher fees and limited consumer choice. The difference here is that the UK government took action to remedy the situation by investing in fintech and encouraging customer mobility (read: easier to switch banks/providers), empowering consumers and businesses which lead to economic growth. Here’s what happened, why it matters, and how Canada can learn from it.
See: Competition Act Amendments and What It Means for Fintech
What was the problem with UK banking?
After the 2008 financial crisis, the UK’s banking system had four banks (HSBC, Barclays, Lloyds, and NatWest) that controlled over 70% of the market, which lead to high fees, limited innovation and significant barriers for small to medium sized businesses (SMEs) to source financial support. A 2016 retail banking report by the UK's Competition and Markets Authority found that 60% of UK small businesses stayed with their banks for over 10 years due to the difficulty of switching. Kudos to the UK government for recognizing that without intervention, the systemic issue of lack of competition would persist.
What did the UK government do to fix it?
So in 2017, to address these challenges the UK government launched the Banking Competition Remedies (BCR), which used £775 million from fines levied on RBS for failing to divest parts of its business as required after the financial crisis, to setup two funding components to stimulate competition:
- The Capability and Innovation Fund (CIF) - £425 million to smaller banks and fintech startups to enhance their technology and expand their services. Awardees like challenger Starling Bank received £100 million to develop better products for small businesses.
- The Incentivized Switching Scheme (ISS) - £350 million to encourage 120,000 small and medium-sized enterprises (SMEs) to switch from traditional banks to challengers like Metro Bank, Tide, and Monzo.
Huge impact from these investments?
- Digital first banks like Starling and Monzo used the funding to roll out modern and user friendly mobile apps, faster payment systems, and lower fees. Starling Bank, for example, grew its SME customer base by 600% between 2018 and 2021. Challenger banks flourished.
- The ISS increased customer mobility and helped over 85,000 SMEs switch banks, giving smaller financial institutions the opportunity to compete and grow their market share.
See: Reversing Canada’s Digital Economy Productivity Decline
- The UK became a global fintech leader and hub, attracting $11.6 billion in fintech investment in 2021 alone, according to Innovate Finance. This was more than the combined fintech investment of Germany, France, and Sweden that year.
- The fintech sector contributed over £11 billion to the UK economy in 2020 and supported over 76,000 jobs.
Why it matters? Canada can learn from the UK
Adopting some of the UK’s strategies would increase competition and innovation in Canada, which is plagued with low productivity, higher fees, limited choice. With targeted investments in fintech through funds like CIF, more Canadian fintech startups could develop leading financial tools.
See: Canada Can Learn from UK’s £100M Public Service Reform
Further, adopting Open Banking (consumer-driven finance) on an accelerated timeline where customers can share their financial data securely would also make it easier to switch bank providers and spur competition, giving small businesses and consumers better options, lower fees, and improved services. This all leads to a growth orientated economy where all stakeholder's needs are met in a modernized, reinvigorated financial sector.
Closing Thought
Canada is making some progress with Open Banking but the pace is slow compared to global peers. By learning from the UK’s experience, Canada could accelerate innovation, attract investment, and ensure a more inclusive financial system.
"Improving banking competition isn’t just about breaking up monopolies. It’s about creating a financial system that works for everyone."
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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