Reimagining SME Banking: An Interview with Richard Davies (Allica Bank)
Insights into building and scaling a tech-enabled bank that redefines financial services for small- and medium-sized businesses.
In this exclusive interview, Richard Davies, CEO of Allica Bank, shares his journey of transforming SME banking in the UK. With a career spanning roles at Barclays, OakNorth, HSBC, and Revolut, Richard brings a wealth of experience in fintech and understanding the unique challenges faced by small- and medium-sized enterprises.
Under his leadership, Allica Bank has rapidly scaled from a startup that was authorised as a bank at the end of 2019 to a full-service provider challenging industry giants, and was ranked the fastest growing startup in Europe by Sifted at the end of 2024. Richard discusses how Allica leverages proprietary technology, innovative go-to-market strategies, and a customer-first mindset to redefine financial services for SMEs. From overcoming fundraising hurdles to building a high-growth team and maintaining a relentless focus on delivering exceptional value, Richard offers invaluable insights into what it takes to disrupt an entrenched industry and serve the backbone of the economy.
Tell us about your journey to becoming the CEO of Allica Bank, and what drew you to the SME sector?
My professional journey has been anything but linear. I started as a strategy consultant, which was essentially a masterclass in understanding diverse business landscapes. After a first short stint in banking at Lloyds, I spent nearly a decade at Barclays developing a profound appreciation for the SME sector – a segment that I realised was fundamentally underappreciated by traditional banking.
In 2013-2014, when the UK started making regulatory changes that made launching new banks more accessible, I was the first employee and inaugural CEO in establishing OakNorth Bank. This experience was transformative as it opened my mind to the possibilities of fintech and the pleasures and pitfalls of a startup.
My subsequent COO role at HSBC gave me critical insights into the back office and regulatory complexity that impacts incumbents, and then at Revolut, I gained experience of what a world class product and engineering company looked like. Then the opportunity came up to take Allica forward post authorisation, it felt like more than a job – it was an opportunity to solve the systemic problem in business banking I’d seen at Barclays and HSBC.
What truly fascinates me about SMEs is their incredible potential. These businesses are the core of the economy, yet they're chronically underserved by traditional banking models. While large corporations have armies of financial advisors and sophisticated banking solutions, SMEs are often left with generic, one-size-fits-all products that don't understand their unique challenges.
What was your initial strategy for scaling Allica Bank?
When I arrived in summer 2020, Allica was essentially a blank canvas. We had just £5 million in loans to SMEs, and the COVID-19 pandemic had complicated the initial launch post authorisation. But complexity breeds opportunity, and we were determined to create something revolutionary.
Our vision was audacious: to become a full-service digital provider that could genuinely challenge established banks like NatWest and HSBC. We weren't interested in creating just another lending product. Our goal was to build a comprehensive banking ecosystem specifically designed for SMEs – current accounts, cards, lending, and savings products that truly understood the nuanced needs of established SMEs (those with 5 to 250 employees).
I'm a firm believer in proprietary technology. When I arrived, our tech infrastructure was primarily third-party, which I saw as a significant limitation. We’ve undertaken a huge range of technology work, building out our ProdEng teams (now over 200 people) and developing our own systems that could truly solve for the needs of the established SME segment. We’ve been guided by three core principles:
Consistent vision – we exist solely to transform finance for established SMEs
Execution focus – talk is cheap, we need to get things done
Continuous improvement – launch MVPs of a full set of products, and then continuously iterate those post MVP
We’ve been carefully designing our organisational structure to seek to enable parallel product development, reduce bottlenecks, and maintain execution speed. This wasn't just about hiring talented people, but creating a culture and infrastructure that could rapidly iterate and respond to market needs.
How did you approach the go-to-market challenges?
Distribution in the established SME sector is very hard. New micro-businesses are relatively straightforward – when the company is formed they need a bank account so are actively looking. But established businesses with entrenched banking relationships? They're a much harder nut to crack even if they are not happy with their current provider.
We developed a nuanced strategy initially focusing on professional intermediaries and brokers. By building specialised technology that made lending easier and more accessible, we really appealed to these finance professionals, winning a wide range of awards as a result. More recently we’ve focused on building direct to customer – both in lending and particularly in current accounts.
Currently, about 80% of our lending comes through intermediaries, with 20% from direct sales. Our longer term goal is a 50/50 split. For current accounts and cards, the ratio is reversed – 80% comes from direct sales.
The key challenge was always the same: provide a compelling, differentiated value proposition that makes established businesses want to switch from their existing solutions.
How do you compete with incumbent banks and build a credible brand?
Building credibility in banking isn't just about marketing – it's about fundamentally reimagining the customer experience. We knew from day one we couldn't be another ‘me-too bank’. We had to be dramatically, almost exponentially better. Our differentiation strategy focused on three critical dimensions:
Exceptional value: We didn't just want to be marginally cheaper, but to completely redefine the value proposition for SME banking.
User experience: We aimed to create a banking interface that is really intuitive and solves the key challenges for established SMEs in a simple way.
Relationship management: Unlike traditional banks that treat SMEs as transaction numbers, we wanted to provide genuine, personalised support.
Right now, we're 3-4x better than traditional banks, but our ambition is to be 10x better. This means constant investment, relentless improvement, and a willingness to challenge every existing banking paradigm. Banking is fundamentally about inertia – people stick with what they know. So to win, you've got to be so compelling that customers can't rationally justify staying with their current provider.
What have been your fundraising experiences?
Fundraising in the startup banking world is brutal. Initially, investors looked at us with significant skepticism. The market had been burned by various banking startups between 2015-2020 that either failed or burnt large amounts of capital to get anywhere.
Investors weren't just looking for a banking license; they wanted proof of a viable, scalable business model. Our initial conversations were challenging. We had to demonstrate that we weren't just another regulatory checkbox, but a genuine business with real transformative potential.
Our approach was simple but powerful: rapidly achieve product market fit and scale super rapidly. We didn't just pitch. We showed. We built. We executed. We proved.
The turning point came when we started showing consistent growth and innovative solutions. Now, we have growth equity firms reaching out weekly, which is a complete reversal from our early days. It's a testament to the power of relentless execution and maintaining a clear, consistent vision.
What's your approach to hiring?
The right cultural fit and potential is key. We have implemented hiring processes like Amazon's bar raiser and Revolut’s home task.
These aren't just recruitment techniques, they're systematic approaches to identifying talent that can thrive in our unique environment. We're not just building a team, we're creating an ecosystem of innovation. Accordingly, our hiring philosophy centers on three key principles:
Cultural alignment
Potential for growth
Ability to execute in a fast-paced environment
But to be brutally honest about my limitations, I'm not a hiring guru. I don't interview everyone. If someone is an exceptional interviewer, that’s great. But I know I'm only average, so I'm transparent about that and let our best interviewers take the lead. The key is understanding your own strengths and weaknesses and building a system that compensates for individual limitations.
The bottom line is: in the world of startup banking and fintech, you've got to be relentless. Adaptability isn't just a skill; it's a survival mechanism. And above all, you must remain laser-focused on delivering exceptional value. Our journey with Allica isn't just about creating a bank. It's about reimagining financial services for the backbone of our economy – the SMEs that drive innovation, create jobs, and fuel economic growth.
Lastly, what’s your favorite book, and why has it been meaningful to you?
"The Geek Way" by Andrew McAfee is an absolute must-read. It's a brilliant synopsis of the features of successful tech-driven companies, breaking down the common attributes that drive exceptional performance – the insights are profound.
I'm also deeply fascinated by biographies of tech leaders like Jeff Bezos and Steve Jobs. These aren't just stories; they're masterclasses in innovation, resilience, and transformative thinking. You always find fascinating insights about what to emulate and what to carefully avoid.
Thank you for the interview, Richard!
Make sure to also visit the websites of SME Tech Leaders and āltitude to stayed informed about the latest market trends and operational insights for building SME Tech startups in Europe!