After the state-backed bank scrapped plans to sell off its Williams & Glyn business to Santander, it was forced to set aside the funds to encourage those customers to switch to other lenders.
The government hopes the extra cash will boost small banks and improve High Street competition.
The Banking Competition Remedies board, which was set up to oversee the process, had previously said that the first round of grants would be announced at some point in February. According to the Evening Standard, the exact date will be this Friday, 22 February.
Metro, CYBG and TSB the favourites
Eleven lenders had originally qualified for the scheme, but Santander pulled out recently – to much surprise – while Virgin money has been taken over by CYBG.
So, there are nine firms left in the mix: Monzo, Metro, Starling, TSB, CYBG, the Co-op Bank, Nationwide Building Society, Svenska Handelsbanken, Arbuthnot and Hampden & Co.
They are competing for £775mln worth of funds: there is £350mln available to incentivise switching and another £425mln to boost business banking deals.
City analysts think CYBG, Metro and TSB should be the front-runners to scoop the biggest slice of the pie, although Monzo has emerged as a bit of a dark horse of late.
It’s taken a while …
But dishing out the money has proved somewhat problematic. It is almost ten years since the process first began and still not a penny has been handed out.
The scheme was expected to come into action last year but was pushed back and bids weren’t asked for until November.
The banks bemoaned the delays, claiming they had spent millions preparing their applications and readying themselves for an influx of customers that have so far failed to arrive.
Analysts have also pointed out that many small businesses are simply not interested in borrowing more, given the UK’s precarious economic situation – they want less debt should things go belly-up post-Brexit.
Do people even want to switch?
Of the near-six million SMEs in the UK, only 30,000 or so bothered to switch bank accounts last year. At that rate, RBS’s 22% market share will take years to register a meaningful decline.
Those figures raise questions as to whether a few quid will encourage customers to ditch their old bank accounts.
Anecdotally, no matter how badly they feel they are treated, most customers don’t want to switch to an unfamiliar bank with little high street presence.
Some in the Square Mile think this is why Lloyds and NatWest keep customers and, perhaps, why CYBG and Metro don’t attract nearly as many as they would like.