Royal Bank of Scotland was directed by the government and the European Commission to set up two funds worth a combined £775 million following its £45.5 billion bailout during the financial crisis. £445 million of funding was earmarked for challenger banks pushing into the business banking market. Banks with assets up to £350 billion in the UK are eligible to bid for the fund.

Writing in City AM, Boden said: “Banks such as Santander, Clydesdale and TSB are all signalling their intent to bid for some of the largest awards. If they are awarded money from the RBS fund, an important opportunity to really disrupt the market by channelling the money to the new generation of startup, or challenger, digital banks, will have been lost. Santander has £300 billion, TSB £42.5 billion and Clydesdale £43.2 billion. Even the largest award of £120 million will have little impact on banks that have attained this mass.”

Starling is applying for one of the three biggest grants ranging from £60-£120 million pounds for its own entry into business banking.

By setting the bar for applications so loosely, the Treasury is in real danger of undermining the ultimate goal of the fund which is to cut RBS’s market share and stimulate competition away from established high street banks, says Boden.

“The RBS fund has a chance to help truly disrupt the market by supporting real innovators. Because they are starting from scratch, building their own proprietary technology from the ground up and based on consumer needs, they can deliver more with certainty at a lower cost and in less time," she writes. “They can give SME customers accounts that can be opened in a matter of minutes without the traditional bureaucratic trappings of business banking which favours bigger companies. But there remains a risk that it could merely further entrench the big players, at the cost of entrepreneurs and small business owners.”