Does tycoon Jim McColl have a business solution SMEs can bank on?

Rather, he says, it was “an idea that crept up on me – a gradual realisation that something had to be done to provide the business banking facilities that small and medium-sized businesses had lost after the global financial crisis of 2007-2008”. 

The result is Alba Bank, a challenger bank that describes itself as Scotland’s first solely dedicated to lending to small and medium-sized enterprises (SMEs). Earlier this year it was awarded a licence by the UK Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) and he predicts that it will be up and running as a full-service bank early in 2024. 

“We’ve non-executive directors on the team who are highly experienced in banking and regulation and have excellent executive directors and managers, so over the past year we’ve put a very robust banking team in place,” he notes.

SMEs, McColl stresses, are the lifeblood of the economy. 

“In the UK they represent 99 per cent of businesses, 60 per cent of employment and 52 per cent of turnover – so there was a need and an opportunity to build a bank that really looked after that community.” 

He continues: “Something was bound to emerge. There was a big gap in the market but as time went on it became clear nothing was happening so I decided we really needed to found a world-class business bank that would make a real contribution to the growth of companies across the UK.”

The opportunity arose in 2017 when the respected Airdrie Savings Bank, which had been founded in 1835, began to be wound down, having found the cost of complying with new regulations to be too great for a small lender, despite several prominent business leaders, including Sir Tom Farmer and

Ann Gloag, each investing £1 million in the bank in 2010. 
The initial idea had been to convert Airdrie Savings Bank’s licence into one for a bank focused on SME business, McColl explains.

“However, when I went to meet with the PRA (Prudential Regulation Authority) at the Bank of England, I was told the best thing I could do was take on the team and apply for a new licence. So I did that, which involved a lot of work.” 

Alba Bank describes itself as the first in Scotland solely dedicated to lending to SMEs

By 2018 McColl had set up a company that was to become Alba Bank and was joined by Airdrie’s senior management team, including chief executive Rod Ashley and chief financial officer Wendy Morrison. 

It was also more of an arduous journey than anticipated: “I was told by a senior person at the Bank of England that it was very supportive of challenger banks and that with the right focus and the right team it should take some 18 months to two years to get a licence. That was five years ago.”  

In March Alba Bank finally received its licence, Authorised with Restrictions (AWR), from the PRA and FCA after a significant investment, which allowed it to move into the mobilisation phase.

“The restrictions are that you’re not allowed to take deposits until you satisfy the Bank of England that you have all the required processes, procedures, and systems in place,” says McColl, who adds that this is exceptionally exacting, involving more than 500 processes and milestones.

Clyde Blowers Capital, the investment vehicle founded by McColl, had been working alongside the Alba Bank team to secure the licence and led the capital-raising for the bank. Other notable backers include former Stagecoach head Sir Brian Souter, F1 driver David Coulthard and David Moulsdale, chairman and CEO of Optical Express. 

McColl says: “We have sufficient capital in place to see us well through next year and into the following year.”

The bank plans to operate initially from hubs in Glasgow and London, which will be augmented by commercial offices in regions across the UK and McColl describes its approach as high-touch, high-tech. 

“We’re determined to reintroduce the idea of relationship bankers, involving a human being who you can sit at the table with and say: ‘This is what we’re trying to achieve – how best can we do it?’

“And we will be using IT that means we’ll be able to react very quickly to applications and inquiries, using all the advantages of digital banking.” 

The bank is partnering with fintech company Mambu’s Saas (Software as a Service) cloud banking platform to manage its lending services. 

Last month, it announced a new partnership with ClearBank, which uses real-time clearing and embedded banking to manage payments for its customers.

“With new technology and Artificial Intelligence there’s a huge amount of value in the information we can provide to customers to help them improve their business and make it stronger with a more competitive cost base – which in turn makes it better for the bank that is lending to them.”

It’s a similar model to that employed by Judo Bank in Australia, which officially became a bank in 2019 and is already directly challenging the big four banks in the country, according to its CEO Joseph Healey – who McColl says has been very helpful in his journey to obtain a banking licence.

His insistence on the need for a challenger bank aimed at meeting SME needs has been impelled by a withering assessment of what he believes to be the traditional banks’ failure to support these companies in the wake of the banking crisis. 

“The skills that define a good business banker have progressively been lost to the industry. It was clear to me that that SMEs were unloved, undervalued and underserved.”

Alba Bank, he says, will address a growing recognition across the government, the British Business Bank, the PRA (Prudential Regulation Authority) and the FCA (Financial Conduct Authority) that SMEs need more support. 

“They’re absolutely critical to the economic health of the country. A pure play bank that is focused on supporting SMEs will achieve superior customer service and superior economics”.
Alba Bank is forging relationships with Scottish Enterprise and the Scottish National Investment Bank: “We’re leveraging all the help that’s available to support growing companies.”

Last month the British Business Bank, a development bank owned by HM Government, launched a £150 million investment fund for Scotland, unlocking additional funding to help smaller businesses and McColl says the team at Alba has already had discussions with the bank.

Looking to next year, McColl says Alba Bank has already had several approaches from prospective clients. 

He says: “Our goal is to be the go-to business bank and to be the best in the UK. It will obviously take a few years to get to that point but we’re on a very exciting journey.”