(Reuters) - Britain's CYBG Plc (>> CYBG) said on Tuesday its was focusing its 350 million pound investment budget on digital banking services, helping it get ready for the so-called open banking revolution and compete with the country's "Big Five" lenders.

CYBG, which made its London debut last year after it was spun off by National Australia Bank (>> National Australia Bank Ltd.), also posted a 33 percent increase in full-year underlying profit before tax.

The company, however, said the lending market would remain competitive in 2018 and that it would face pricing pressure in its mortgage and unsecured personal loan business, sending its shares down about 2 percent.

Britain's nine biggest banks are getting ready for open banking, which would involve sharing customers' data with third parties that can then use it to build or recommend better suited products.

"We have been building our technology with very much a view that there is an open marketplace type model coming ... a platform that allows us to do fintech activity in a fraction of the time of the big guys," CEO David Duffy told Reuters.

Under the new system, which will be rolled out in 2018, rivals can show a bank's customers how much could be saved by switching lenders. Financial technology, or fintech, companies are expected to offer smartphone apps and web sites that use customers' information to enable them to compare bank charges. (http://reut.rs/2mOs8L0)

The lender said last year it would invest 350 million pounds to reduce costs and increase efficiencies in a tough trading market.

"At the heart of this investment is our iB digital platform, which will enable us to provide a superior experience for all our customers and ensure we are ready for the dawn of open banking," Duffy said.

Banking data - dealing with matters as varied as account transactions, mortgage payments and fitness club subscriptions - is currently not easy to share with a third party in a format that computers can read for feeding into apps or for use by new banks getting off the ground.

The government wants to increase competition on the high street in a sector dominated by just five banks - HSBC (>> HSBC Holdings), Barclays (>> Barclays), Lloyds (>> Lloyds Banking Group), RBS (>> Royal Bank of Scotland Group) and Santander UK .

CYBG is one of Britain's challenger banks that emerged after the financial crisis to fill a gap in small business lending and capitalise on problems at the big banks.

Duffy said CYBG's tech innovations allowed it to lend between 10,000 pounds and 50,000 pounds to small and medium sized businesses in less than 10 minutes.

He added that the firm was also the first in Britain to launch mobile cheque deposits.

The lender said it would pay a maiden dividend of 1 pence per share.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Saumyadeb Chakrabarty and; Akshay Lodaya)

By Noor Zainab Hussain