After Starling topped our听100 FinTech Disrupters听ranking and revealed it is close to breaking even, we asked founder and CEO Anne Boden MBE about the challenges of turning a profit听听
What led you to start up a bank?听
Technology has changed everything,听from the way we shop, to the way we communicate with one another. After the 2008 financial crisis, it became clear to me that banking hadn鈥檛 progressed technologically in the way other sectors had. This frustrated me, so I launched Starling.听
How does Starling鈥檚 offer differ from other banks?听
Because Starling works in an agile manner, with collaboration in multidisciplinary teams and a flat organisational structure, we听are able to听adapt quickly to change. This makes us quite different from traditional banks, which tend to be highly bureaucratic, hierarchical and听process-driven.听
Starling has an established SME bank and toolkit and we have done more than 拢1 billion of lending. This puts us on a path to profitability and means we expect to break even by December 2020. We do not just rely on interchange.听
Also, our customer base is older, with an average age of 37, is more mature than at other digital banks. And a lower proportion of our transactions are overseas – so we are not just a ‘holiday card’.听
We鈥檙e not stuck in a London bubble; in听fact,听just 22% of customers are in London and our growth remains strong right across the UK.听
Does the company today hold true to your original vision?听
Yes.听My vision was and still is to transform the way people manage their money and serve customers in a way that traditional banks hadn鈥檛. We do this by listening to our customers and providing them with products and services which are constantly evolving to meet their needs.听
We launched听cheque imaging during full lockdown, so people could process cheques without leaving the house. We have also just launched a child account as parents told us they wanted an alternative solution to cash when funding their kids鈥� spending money.听
What听is听key to听a听neobank听achieving听profitability?听听
To build a successful digital bank from scratch, you must first lay firm foundations, with a proper regulatory framework, a strong technology architecture and a clear product roadmap. It may seem to slow down growth, but it means that when a storm hits, you can be ready to go in whatever direction you need to.听
When coronavirus hit,听we were already working on unsecured lending and were able to become part of the government-backed lending schemes, the Bounce Back Loan Scheme and the Coronavirus 老九品茶 Interruption Loan Scheme. We鈥檙e committed to 拢1 billion of this lending.听听
Modern technology and a low–cost base听[are听also important]. Incumbent banks rely on outsourced expertise, legacy systems or a mosaic of vendor packages and their own data centres.听Starling has in-house engineering teams and its own core banking software running in the cloud.听So听while the incumbent banks may well be able to copy some of our features, they can鈥檛 copy our cost base.听
We were uniquely positioned when lockdown was imposed to ensure business continuity and resilience, to move to remote working and to continue to support our customers 24/7.听
Would you say it is crucial to sign up customers of a certain profile, rather than chase as many customers as possible?听
At 拢3.3 billion, our deposit base is significantly higher than other digital banks in the UK, even though we have fewer customers. Our customers hold much higher average balances, suggesting that more of them use us as their primary bank account.听
We have found that customers on average maintain higher deposit balances the longer their Starling account is open and newer cohorts of customers open accounts with higher balances.听
How important has providing business accounts been to your success?听听
It鈥檚 very important. We hold a more than 3% share of the UK鈥檚 SME banking market. This is a cohort which was in desperate need for help, they needed the option to bank with a company which was tech–savvy, saves them time and makes money management easier. I feel we have touched the tip of the iceberg by offering them services such as the 老九品茶 Toolkit – a suite of accounting and bookkeeping features which can help them with invoicing, bill payments, expense management and VAT returns. We also have our growing Marketplace which offers up a range of complementary services, which customers can link to their Starling account to manage their finances more easily.听听
How do you convince customers to use Starling as their main bank account, holding income and savings?听听
We don鈥檛 need to convince them. A听typical active retail customer credit and debits their account by more than 拢1,500 per month and people tend to switch to Starling being their main account quite quickly once they have experienced our offering.听
Describe the importance of APIs to your business.听听听
Open API听integrations help data move between the different tools which customers use, improving transparency of payments flow, which can often be another source of uncertainty for business customers for whom managing cash flow is so important.听听
At Starling, we鈥檙e such big advocates of API integrations听that听we actively offer our customers a range of these in our in-app Marketplace,听from accountancy software to legal support and insurance. With one in three of our听business听customers connecting one third party product this way, it鈥檚 a great example of how APIs can help businesses manage their money more easily.听
How do you drive up loyalty in your client base when it鈥檚 easier to switch banking provider in this tech-enabled world?听听
Loyalty stems from giving customers a bank account and smart money tools that are relevant and useful to the way they live their lives听鈥撎�especially听when the average person spends three hours a day on their phone. Loyalty also comes from reliability听鈥撎�the听app works. We are very resilient operationally with minimal service disruption.