Royal Bank of Scotland (RBS) is in the early stages of creating a standalone digital bank, according to Sky News, which reported that former chief operating officer Mark Bailie is leading the project.

RBS has already signed agreements with several FinTech firms such as Funding Circle – which it works with to direct customers to peer-to-peer and other alternative finance providers – but this move would be in direct competition with challenger banks like Monzo, Revolut and Atom.

No further details were available in terms of a potential launch date, branding or autonomy within the banking group. An RBS spokeswoman stated that the industry is changing rapidly and therefore “we need to keep pace with this by launching new approaches to better serve our customers.”

However, she added: “We will not comment on media speculation, but we're focussed on using automation and technology to deliver a more efficient banking experience that better reflects the changing way our customers now bank.”

The news follows RBS announcing its first annual profit since it was bailed out with more than £45bn of taxpayer money a decade ago.

Creating a digital lender would likely be much simpler and cheaper than RBS’ recent attempt to rebrand hundreds of branches into a separate network under the Williams & Glyn name. That ended in failure, after two agreements to sell the business to Santander UK collapsed and RBS had to secure EU approval for an alternative plan to reduce its market share.

Digital challenger bank Monzo revealed this week that it has signed up 500,000 users to its current account service since launching in October last year, while last year Revolut announced it had passed the 1m customer mark, with around half of those in the UK. Earlier in March, Atom Bank landed £149 million in its latest wave of financing.

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