The Startups 20: Starling Bank

The challenger bank that’s truly flying

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Founder: Anne Boden
Founded: 2014

The Starling Bank story

It seems as if Anne Boden – the force of nature who founded Starling from scratch – was destined to run her own bank. After all, she had already run her school bank at the tender age of 11, and founded Starling after working in banking for decades.

Surprisingly though, banking was only a fall back option after her degree in chemistry and computer sciences at Swansea University, a safe choice that her mum persuaded her to apply for. Once she got into banking though, something about it clearly agreed with her, and she rose through the ranks and from bank to bank. Even then, she was focused on using tech to improve banking, helping to develop the UK’s same-day payments service (it previously took up to three days for your payment to reach someone else’s account).

However, the longer she worked in banking, the more her dissatisfaction grew. These big institutions were unable to change their services quickly enough to meet the needs of a new generation of consumers.

If Boden was going to make that happen, she would have to start her own bank. And so, in 2014, she quit her job and got started.

What followed will be familiar to most entrepreneurs – a long process of research and email sending as you try to get people interested in your idea. In Boden’s case, this idea was a mobile-only digital bank that would take on the big boys, and offer a radically new banking experience.

Everything changed when Boden managed to get the attention of Austrian billionaire Harald McPike, who quickly agreed to provide the £48m that was needed to get Starling its banking licence, and to make a real market push from that point.

It was a bold call from McPike, but one that seems to be paying off, with Starling now having over 1.5 million customers all over the world – not to mention legions of fans happy to spread the word on social media.

In short, it’s truly flying.

Boden told us: “I started Starling because I wanted to disrupt banking and change banking for good by launching digital accounts with smart money management features. The fact that the big banks are now copying some of our smartest features shows that we really have disrupted the whole industry. It is a great honour that this has been recognised.”

Why we chose Starling Bank as one of the Startups 20

It’s hard not to love the Starling story – an industry veteran leaving her storied career behind because she believed people deserved a better bank.

It’s hard to think of many sectors with a higher barrier to entry than banking, but since it earned the backing of McPike’s millions in 2016, Starling has grown remarkably.

After properly launching in 2017, the last three years have seen Starling go from zero to approximately 1.5 million customers, expand into business banking, win tons of awards (including being named Best British Bank at the British Bank Awards three years in a row), and attract hundreds of million of pounds in investment.

It’s also launched two TV ad campaigns, with the most recent promos for Starling business banking featuring a load of flying sheds (it makes sense when you watch it).

Most importantly, it’s on track to actually make a profit this year – and, as explained below, did a damn good job of coping with COVID-19.

Starling Bank in 2020

2020 has been an annus horribilis for challenger banks – Monzo more than doubled its losses as it tried to rapidly expand, while Revolut cut 60 staff and promoted a share swap scheme where employees could swap part of their salary for Revolut shares.

In stark contrast, Starling’s cheery summer trading update noted that the bank still expects to break even by the end of this year, with annual revenue expected to be around £80m. Starling also didn’t furlough or cut any stuff during the pandemic.

According to Boden: “2020 has been a transformational year for Starling. Our growth across the board has continued at pace, despite the impact of the coronavirus emergency. We’re still on track to break even by the end of the year. Since January, Starling has reached the milestone of 1.8  million customer accounts, including more than 250,000 accounts for small businesses, as of October 2020.”

So, what happened? It’s partly that Starling has successfully attracted older customers than many other challenger banks – the average age of a Starling personal banking customer is 37 – and that this means its accounts have a higher average deposit value than Monzo or Revolut.

It’s also continued to innovate and launch new products throughout the year: “Many new features have been launched in the last year, including USD accounts, multi-owner business accounts for limited companies, a child account called Kite and a business toolkit for estimating tax and VAT and creating and tracking invoices.

“In response to the coronavirus, we launched in-app cheque deposits and the Connected card, enabling trusted friends or carers to buy shopping or supplies on the account holder’s behalf. The connected card is the launch I am most proud of. It was built and released within three weeks. Even with the disruption that the pandemic has caused, Starling is continuing to grow and innovate to support our customers.”

However, what’s really kept Starling soaring during COVID-19 is its push into business loans. Boden’s decades of banking experience meant Starling was accredited by the British Business Bank as an approved lender under the bounce back and coronavirus business interruption loan schemes, and it subsequently lent huge amounts to SMEs (safe in the knowledge that those loans were backed by the government). In total, this lending is just over £903m, and represents the vast majority of its £1bn balance sheet.

Unlike its rivals, it’s also continued to primarily focus on the UK, securing a UK banking licence (which Revolut for example does not have). The bank is steadily building a customer base in its home country, and opening offices in London, Southampton, and Cardiff.

Overall, the picture is very positive for Starling. It may be a challenger bank powered by cutting-edge tech, but Boden’s industry experience and a real focus on customer service means it comes across as a more mature, sensible option – vital as it tries to persuade older (i.e. wealthier) customers to leave their old banks behind and embrace the digital revolution.


The future?

Boden: “The pandemic has fast tracked the move to digital banking and I foresee this trend will continue. For the startup scene I think it will be a tale of two halves. Some businesses will adapt to the ‘new normal’ and succeed and others will fail, but at the centre of any business model should be a willingness to change in order to succeed.

“Our ambition remains the same, to continue to give people a fairer, smarter and more human alternative to the banks of the past and ultimately, change banking for good. We hope eventually to do this on a global scale.”

We’ll be watching closely to see just how high this Starling can climb.

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Written by:
Alec is Startups’ resident expert on politics and finance. He’s provided live updates on the budget, written guides on investing and property development, and demystified topics like corporation tax, accounting software, and invoice discounting. Before joining, he worked in the media for over a decade, conducting media analysis at Kantar Media and YouGov, and writing a wide variety of freelance pieces.
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