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{{DISPLAYTITLE:Bank referral scheme}}The [[Government of the United Kingdom|UK government]]-mandated '''bank referral scheme''' (Designated Platforms) was created by the Small Business, Enterprise and Employment Act 2015<ref name=":0">[http://www.legislation.gov.uk/ukpga/2015/26/section/5/enacted Small Business, Enterprise and Employment Act 2015 2015 c. 26PART 1Financial information about businessesSection 5]</ref> to allow the UK government to track businesses and their requests for business finance.<ref>{{Cite web|url=https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/341741/Summary_of_Responses_-_platforms_for_rejected_SME_finance.pdf|title=Government Responses Platforms for rejected SME finance|last=|first=|date=|website=|publisher=|access-date=}}</ref> The scheme was launched in November 2016 after more than two years of deliberation.<ref>{{Cite news|url=http://www.altfi.com/article/2361_bank_referral_scheme_goes_live|title=Bank referral scheme goes live - AltFi News|newspaper=AltFi|access-date=2016-11-02}}</ref>
{{Orphan|date=November 2016}}


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Businesses who have been unsuccessful in a [[credit (finance)|credit]] application process with a bank will be asked for their permission to have their financial information passed to designated finance platforms, who can contact the business in a regulated time-frame.
{{globalize/UK|date=October 2016}}
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The government-mandated '''Bank Referral Scheme ''(Designated Platforms)''''' was created by the Small Business, Enterprise and Employment Act 2015<ref name=":0">[http://www.legislation.gov.uk/ukpga/2015/26/section/5/enacted Small Business, Enterprise and Employment Act 2015 2015 c. 26PART 1Financial information about businessesSection 5]</ref> to allow the UK government to track businesses and their requests for [[Corporate finance|business finance]]. The scheme was launched on 1st November 2016 after months of delay and more than two years of deliberation<ref>{{Cite news|url=http://www.altfi.com/article/2361_bank_referral_scheme_goes_live|title=Bank referral scheme goes live - AltFi News|newspaper=AltFi|access-date=2016-11-02}}</ref>.


The three designated finance platforms selected are Funding Options, Funding Xchange and Alternative Business Funding.<ref name="gov.uk">{{Cite news|url=https://www.gov.uk/government/news/new-matchmaking-service-for-small-businesses-looking-for-finance|title=New matchmaking service for small businesses looking for finance}}</ref>
== The statutory format of the referral scheme ==


The Sunday Times reported in March 2017 that since the launch, the scheme has seen low numbers of referrals. Of the businesses which have been declined by the high street banks, less than 24 percent have been referred to the Designated Platforms.<ref name=":2">{{Cite news|url=http://www.thetimes.co.uk/edition/business/bank-said-no-but-i-didnt-lose-my-sense-of-hummus-0xj052q02|title=Bank said no, but I didn't lose my sense of hummus|access-date=2017-03-06|language=en}}</ref>
The Scheme imposes a [[Statutory law|statutory duty]] on [[List of banks in the United Kingdom|UK banks]] to pass on businesses who have been unsuccessful in applying for finance from a bank to a designated finance platform who will contact them in order to refer them to alternative finance providers.


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== How the Referral Scheme works ==
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For the Referral Scheme to perform as envisaged by the UK Government, the businesses affected must give formal permission to the bank to pass on their information to one platform or too many referral platforms. Business owners have expressed concern and confusion as to how the referral scheme will perform in practice.<ref>{{Cite news|url=http://www.thisismoney.co.uk/money/smallbusiness/article-3318699/Bank-referral-scheme-jilted-small-businesses-faces-late-start.html|title=Bank referral scheme for jilted small businesses faces late|last=OWEN|first=VICKI|date=14 November 2015|work=|access-date=|via=}}</ref>
The bank referral scheme imposes a [[Statutory law|statutory duty]] on selected UK high street [[bank]]s to pass on businesses who have been unsuccessful in applying for finance to the three designated alternative finance platforms, who will then email or phone the businesses to offer their service. If a business chooses to interact with any of the finance platforms they fill in a few questions and the finance platform runs the data against their panel of finance providers to see if there are any potential matches. If there are matches the business can then choose whether to make contact with a finance provider and then and only then is their data shared with that finance provider.<ref name=":3">{{Cite news|url=https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11014563/Banks-to-be-forced-to-increase-competition-in-SME-lending.html|title=Banks to be forced to increase competition in SME lending|newspaper=Telegraph.co.uk|access-date=2016-11-16}}</ref> Funding available through the bank referral scheme covers term lending, receivables finance, asset finance, commercial property finance and online lenders, as well as government-backed and not-for-profit lenders. None of the three finance platforms support equity finance.<ref name="The Gazette">{{Cite news|url=https://www.thegazette.co.uk/insolvency/content/100897|title=The new bank referral scheme: an insider's view}}</ref>

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For the referral scheme to perform as envisaged by the UK Government, the businesses affected must give formal permission to the bank to pass on their information to [[Platforms (computing)|platforms]]. Business owners have expressed concern and confusion as to how the referral scheme will perform in practice.<ref name=":1">{{Cite web|url=http://www.bankofengland.co.uk/publications/Pages/speeches/2015/851.aspx|title=UK business finance since the crisis – moving to a new normal? - speech by Ian McCafferty {{!}} Bank of England|website=www.bankofengland.co.uk|access-date=2016-11-16}}</ref>


== Concerns ==
== Concerns ==
Concerns have centred around the high-[[interest rate]]s that are charged by alternative finance providers,<ref name=":1">{{Cite web|url=http://www.bankofengland.co.uk/publications/Pages/speeches/2015/851.aspx|title=UK business finance since the crisis – moving to a new normal? - speech by Ian McCafferty {{!}} Bank of England|website=www.bankofengland.co.uk|access-date=2016-11-16}}</ref> how [[confidential information]] will be treated by the designated platforms who are small [[Startup company|start-up]] businesses and the possibility of being contacted by a number of unknown companies who have had access to confidential business and financial information.<ref>{{Cite news|url=https://www.businessinsider.com/fintech-could-cause-bankers-to-lose-jobs-2015-9|title=Fintech could trigger a tsunami of banking layoffs|newspaper=Business Insider|access-date=2016-11-16}}</ref>

Concerns have centred around the high-[[interest rate]]s that are charged by alternative finance providers,<ref>[http://www.bankofengland.co.uk/publications/Pages/speeches/2015/851.aspx McCafferty Ian, Bank of England, speech in Bloomberg, London, 20 October 2015]
</ref> how confidential information will be treated by the Designated Platforms who are all small start-up businesses<ref name=":1">{{Cite web|url=http://www.altfi.com/article/2261_bank_referral_scheme_to_go_live_early_next_quarter|title=Bank referral scheme to go live early next quarter|last=Weeks|first=Ryan|date=23 September 2016|website=|publisher=Altfi News|access-date=}}</ref> and the possibility of being contacted by a number of unknown companies<ref>{{Cite news|url=http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11787286/Referrals-for-bank-jilted-small-firms-still-conspicuously-absent.html|title=Referrals for bank-jilted small firms still conspicuously absent|last=Burn-Callander|first=Rebecca|date=10 Aug 2015|work=|access-date=|via=}}</ref> who have had access to confidential business and financial information.

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The implementation of the scheme was also been slowed down by multitude of logistical problems such as how and when a bank should refer a business to the [[Alternative financial services|alternative finance]] sector.<ref name=":1" />

⚫
== How the Referral Scheme will work ==

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Businesses who have been in a [[credit]] application process with a bank and been declined credit will be asked for their permission to have their financial information passed to a pool of alternative financial platforms whom in a short regulated time-frame can contact the business to offer them alternative loans. Designated Platforms selected are [[Funding Options]], Funding Xchange and Bizfitech.

If the business then gets turned down by any of the pool of financial platforms then the business information can be passed to all other financial platforms so they can also contact the business to offer them alternative loans.<ref>{{Cite journal|title=Help to match SMEs rejected for finance with alternative lenders|journal=HM Treasury and Department for Business Innovation & Skills|volume=}}</ref>


== Background ==
== Background ==
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The idea of the bank referral scheme was advocated by the [[Liberal Democrats (UK)|Liberal Democrats]] under [[Nick Clegg]] with the former Liberal Democrat [[Secretary of State for Business, Energy and Industrial Strategy|Business Secretary]], [[Vince Cable|Sir Vince Cable]] hinting at it in March 2014.<ref>{{Cite web|url=http://www.altfi.com/events/altfi_europe_summit_2014|title=AltFi Europe Summit 2014|last=|first=|date=7 June 2023|website=|publisher=|access-date=}}</ref> The then [[Chancellor of the Exchequer]], [[George Osborne]] announced in August 2014<ref>{{Cite web|url=http://www.altfi.com/article/0345_referral_system_confirmed_as_government_plans_for_uk_to_rule_the_world_of_fintech/|title=Referral System Confirmed as Government Plans for UK to Rule the World of Fintech|last=|first=|date=6 August 2014|website=|publisher=|access-date=}}</ref> the scheme; after a five-month industry consultation selected [[British Business Bank]] (the UK's state development bank) to run the assessment process to recommend three designated finance platforms on behalf of [[HM Treasury]].<ref>{{Cite web|url=http://british-business-bank.co.uk/finance-referral-platforms-policy/|title=British Business Bank: Finance Platforms}}</ref>


⚫
The scheme which was included in the Small Business, Enterprise and Employment Act 2015 <ref name=":0" /> was given [[Royal assent|Royal Assent]] in March 2015. The implementation of the scheme was slowed down by a multitude of logistical problems such as how and when a bank should refer a business to the alternative finance sector.
⚫
The idea of the bank referral scheme was advocated by the [[Liberal Democrats]] under [[Nick Clegg]] with the former Liberal Democrat [[Secretary of State for Business, Energy and Industrial Strategy|Business Secretary]], [[Vince Cable|Sir Vince Cable]] hinting at it in March 2014.<ref>{{Cite web|url=http://www.altfi.com/events/altfi_europe_summit_2014|title=AltFi Europe Summit 2014|last=|first=|date=|website=|publisher=|access-date=}}</ref> The then [[Chancellor of the Exchequer]], [[George Osborne]] announced in August 2014<ref>{{Cite web|url=http://www.altfi.com/article/0345_referral_system_confirmed_as_government_plans_for_uk_to_rule_the_world_of_fintech/|title=Referral System Confirmed as Government Plans for UK to Rule the World of Fintech|last=|first=|date=|website=|publisher=|access-date=}}</ref> the scheme; after a five-month industry consultation.


A year after the announcement of the scheme, there was no progress and the scheme seemed to have been forgotten.<ref>{{Cite news|url=https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11787286/Referrals-for-bank-jilted-small-firms-still-conspicuously-absent.html|title=Referrals for bank-jilted small firms still conspicuously absent|work=Telegraph.co.uk|access-date=2017-03-06|language=en}}</ref>
The scheme which was included in the Small Business, Enterprise and Employment Act 2015<ref name=":0" /> was given [[Royal assent|Royal Assent]] in March 2015 but not expected to be implemented until October 2016.


The scheme was launched on on 1st November 2016<ref>{{Cite news|url=https://www.theguardian.com/small-business-network/2016/nov/01/bank-turned-down-small-business-loan-alternative-funding-referral|title=Bank turned down your small business loan? Now it must offer an alternative|last=Sheppard|first=Emma|date=2016-11-01|newspaper=The Guardian|language=en-GB|issn=0261-3077|access-date=2016-11-02}}</ref>. The launch came after months of delay due to logistical issues such as; concerns over some of the Designated Platforms not meeting data protection standards needed by the regulators<ref>{{Cite news|url=http://www.altfi.com/article/2261_bank_referral_scheme_to_go_live_early_next_quarter|title=Bank referral scheme to go live early next quarter - AltFi News|newspaper=AltFi|access-date=2016-11-02}}</ref>. The delay launch came after more than two years of logistical problems<ref name=":1" /> which stalled the commencement of the Scheme.
The bank referral scheme was launched on 1 November 2016<ref name="gov.uk"/> after a further two-month delay.<ref>{{Cite news|url=http://www.altfi.com/article/2261_bank_referral_scheme_to_go_live_early_next_quarter|title=Bank referral scheme to go live early next quarter - AltFi News|newspaper=AltFi|access-date=2016-11-16}}</ref>


==References==
==References==
{{reflist}}
{{reflist}}


[[Category:Banks]]
[[Category:Banking in the United Kingdom]]
[[Category:Building societies]]
[[Category:Building societies of the United Kingdom]]
[[Category:Loans]]
[[Category:Loans]]

Latest revision as of 12:39, 5 November 2024

The UK government-mandated bank referral scheme (Designated Platforms) was created by the Small Business, Enterprise and Employment Act 2015[1] to allow the UK government to track businesses and their requests for business finance.[2] The scheme was launched in November 2016 after more than two years of deliberation.[3]

Businesses who have been unsuccessful in a credit application process with a bank will be asked for their permission to have their financial information passed to designated finance platforms, who can contact the business in a regulated time-frame.

The three designated finance platforms selected are Funding Options, Funding Xchange and Alternative Business Funding.[4]

The Sunday Times reported in March 2017 that since the launch, the scheme has seen low numbers of referrals. Of the businesses which have been declined by the high street banks, less than 24 percent have been referred to the Designated Platforms.[5]

How the Referral Scheme works

[edit]

The bank referral scheme imposes a statutory duty on selected UK high street banks to pass on businesses who have been unsuccessful in applying for finance to the three designated alternative finance platforms, who will then email or phone the businesses to offer their service. If a business chooses to interact with any of the finance platforms they fill in a few questions and the finance platform runs the data against their panel of finance providers to see if there are any potential matches. If there are matches the business can then choose whether to make contact with a finance provider and then and only then is their data shared with that finance provider.[6] Funding available through the bank referral scheme covers term lending, receivables finance, asset finance, commercial property finance and online lenders, as well as government-backed and not-for-profit lenders. None of the three finance platforms support equity finance.[7]

For the referral scheme to perform as envisaged by the UK Government, the businesses affected must give formal permission to the bank to pass on their information to platforms. Business owners have expressed concern and confusion as to how the referral scheme will perform in practice.[8]

Concerns

[edit]

Concerns have centred around the high-interest rates that are charged by alternative finance providers,[8] how confidential information will be treated by the designated platforms who are small start-up businesses and the possibility of being contacted by a number of unknown companies who have had access to confidential business and financial information.[9]

Background

[edit]

The idea of the bank referral scheme was advocated by the Liberal Democrats under Nick Clegg with the former Liberal Democrat Business Secretary, Sir Vince Cable hinting at it in March 2014.[10] The then Chancellor of the Exchequer, George Osborne announced in August 2014[11] the scheme; after a five-month industry consultation selected British Business Bank (the UK's state development bank) to run the assessment process to recommend three designated finance platforms on behalf of HM Treasury.[12]

The scheme which was included in the Small Business, Enterprise and Employment Act 2015 [1] was given Royal Assent in March 2015. The implementation of the scheme was slowed down by a multitude of logistical problems such as how and when a bank should refer a business to the alternative finance sector.

A year after the announcement of the scheme, there was no progress and the scheme seemed to have been forgotten.[13]

The bank referral scheme was launched on 1 November 2016[4] after a further two-month delay.[14]

References

[edit]
  1. ^ a b Small Business, Enterprise and Employment Act 2015 2015 c. 26PART 1Financial information about businessesSection 5
  2. ^ "Government Responses Platforms for rejected SME finance" (PDF).
  3. ^ "Bank referral scheme goes live - AltFi News". AltFi. Retrieved 2016-11-02.
  4. ^ a b "New matchmaking service for small businesses looking for finance".
  5. ^ "Bank said no, but I didn't lose my sense of hummus". Retrieved 2017-03-06.
  6. ^ "Banks to be forced to increase competition in SME lending". Telegraph.co.uk. Retrieved 2016-11-16.
  7. ^ "The new bank referral scheme: an insider's view".
  8. ^ a b "UK business finance since the crisis – moving to a new normal? - speech by Ian McCafferty | Bank of England". www.bankofengland.co.uk. Retrieved 2016-11-16.
  9. ^ "Fintech could trigger a tsunami of banking layoffs". Business Insider. Retrieved 2016-11-16.
  10. ^ "AltFi Europe Summit 2014". 7 June 2023.
  11. ^ "Referral System Confirmed as Government Plans for UK to Rule the World of Fintech". 6 August 2014.
  12. ^ "British Business Bank: Finance Platforms".
  13. ^ "Referrals for bank-jilted small firms still conspicuously absent". Telegraph.co.uk. Retrieved 2017-03-06.
  14. ^ "Bank referral scheme to go live early next quarter - AltFi News". AltFi. Retrieved 2016-11-16.
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