Talking tech: Starling Bank

Starling Bank is leading the way in today’s digital world with the first UK mobile-only current account. CEO Anne Boden explains how a business disrupting the traditional full-service banking model is set to benefit further from the dawn of open banking.

The mission driving the London-based Starling team is a simple one: fully connecting technology and finance in order to help people manage their money.

Starling gained their banking licence in July 2016 and officially launched their banking app in May 2017. The bank is continuing to move up the app league tables. “This year we have released seventeen updates to our app, offering more and more tools to help people keep track of their money and we are now among the top digital banking apps in the app store,” Boden says.

Customers aren’t only from younger generations. “We do have lots of customers in their 20s and 30s, but we have customers of all ages - even in their 90s!” Boden says. “Starling customers are people who look to technology for solutions, people who love the ease of doing their shopping, hailing a taxi or ordering dinner from their mobile phones. Lots of banks require you to use a laptop to do certain functions but some people manage everything from their phones without a laptop. With Starling, you can do everything on your smartphone. We are perfect for people who have a mobile life both in terms of travelling and in terms of using technology to make their lives easier.”

"Following the financial crisis, I saw how technology, regulation and people had changed - but banking remained the same. After 30 years in the banking world, I knew that the best way to develop a bank which would deliver the latest technology to really benefit people was to build a new one - from scratch. Mobile is the foundation of our business, not an additional service within an existing, traditional service.”

Customers can open a Starling account as an additional current account, or make a full switch from their old banks to Starling. “When people start to use Starling and benefit from built-in tools such as seeing how much they spend on groceries or travel each month, they often decide to make a full switch and manage all their everyday spending with Starling,” Boden says.Digital to the core

As a FinTech start-up, it’s no surprise that Starling is a digitally native company. “Everything is digital,” Boden says. “We were the first UK retail bank with 100% cloud based technology - technology is at the heart of everything we do.” Boden and her team have built a ‘full-stack’ bank. “Being ‘full-stack’ means that we built all the technology ourselves,” Boden explains. “Most new banks go out and buy a banking package, but we built the technology because a lot of the banking packages have been around for 10, 20 or 30 years. We wanted to bring the new technology from Silicon Valley directly into banking and we are much, much more of a technology company than a bank. We have 136 people here and 40 of those are engineers so we are very centred on software engineering. We believe that we can innovate and create products very quickly because we do it ourselves. We can start talking to customers on a Monday, have an idea on a Tuesday, test it out on a Wednesday and implement it on a Friday. We develop new ways of doing things all the time. Every week there are small changes which improve our service and are made instantly available to customers.”

"Knowing exactly where your money is going is incredibly empowering and it is something that everyone can be a part of. Switching to Starling is paperwork free - we are the only bank that has mobile switching. Simply entering your old sort code and account number in the Starling app starts the process which is all done for you within a week.”

Starling was launched in the knowledge that open banking was on its way, with the Second Payment Services Directive (PSD2) coming into force from January 2018. “Our aim is to put customers back in control of their money, their data - PSD2 regulation recognises the banking has been closed and uncompetitive for too long. Unlike traditional banks which will have to significant changes to comply with the PSD2, Starling has been open and connected from the beginning” Boden says. “Our open APIs [application programming interfaces] are PSD2 ready.”

Open banking is a great opportunity for companies like Starling to encourage competition and innovation within the industry. “Open banking will mean that all banks have to open up their APIs,” Boden says. “These APIs can share huge amounts of information between financial services partners, which allows customers to connect their data and use the data in a secure and innovative way. We believe that customers should own their own data and for many years the banks have used data against customers for the banks’ benefit. This regulation [PSD2] is all about letting the customers control how and when their data is shared in order to enable seamless integration between products and create a faster, more connected experience for the customer.”

Starling was the first UK bank to develop open API’s for third parties. “We publish all our APIs through a developer portal which other FinTechs or developers can then access and start building on,” Boden says. “We first opened up our APIs at the Hackathon we hosted in April this year and the ideas and projects which were created were so impressive. Our community of developers are very engaged with what we are doing at Starling and can become part of the conversation through this platform.”

FinTech partners

Starling’s focus is their mobile-only current account. Current accounts for businesses will be available next year, primarily for micro and small businesses with up to around 10 employees. Starling’s Marketplace, enabled by open APIs, is their way of continuing to concentrate their efforts into building their current accounts; financial products from other FinTechs are collected and connected in the Starling app. “We want to do one thing, and do that really well” says Boden.

"“But we also want to give our customers a choice of other financial products such as mortgages or loans, created by FinTechs who are also providing digital solutions in finance.”

Starling Marketplace partners are carefully vetted. “We publish that vetting process and are very transparent about it,” Boden says. “They [partners] can apply for various levels of access and we have processes for taking them through those levels of access before they can connect with us.” For example, Starling will look at their processes, their policies in relation to legislation, technology and security, their commercial viability and the type of business they are undertaking – i.e. whether they are of potential benefit to Starling’s own customers.

Initial products available through the Marketplace were loyalty products. However, since the interview in November 2017, Starling has become the first UK bank with approval from the regulators to offer customers direct access to a wide range of financial products, all from within the app. Products for mortgages, secured loans, peer-to-peer lending and asset management are all expected to be integrated into the app. “We are already connected to partners such as Moneybox, which helps people to save and invest in various ISAs,” Boden says. The Moneybox mobile app enables users to round up their card purchases to the nearest pound and invest their spare change in the stock market.  

Starling’s connected approach to business is also reflected in the speed with which they partnered with new payment platforms, including Apple Pay, Android Pay and Fitbit Pay. “We were the first bank to use Fitbit Pay in the UK,” Boden says. “We were also the first bank to provide in-app provision of Apple Pay.” In other words, as soon as a customer receives their Starling debit card, the details are automatically entered in their Apple Pay or Android Pay wallet. 

Challenges and goals

The biggest challenge Boden faced in getting Starling up and running wasn’t the technology. “The biggest challenge was actually getting the banking licence,” she says. “It took three years.” The need to gain regulatory approval is “a huge barrier to entry” she notes. “What we do is quite difficult. It involves lots of technology and lots of regulatory businesses. We were the first digital bank offering a current account in the UK.” Having led the way, Boden thinks it possible that more digital banks will follow Starling’s lead and provide more competition in the industry, which she welcomes.

Starling has clear goals for the future. “In 2018 we are launching our business account and our Euro account and then expanding into Europe probably at the end of that year,” Boden says. Starling has already obtained a regulatory “passport” so that it can set up as a bank in Ireland and then use its Irish base to offer services to customers in other EU countries.

What next for FinTech and banking?

“I think that in 2018/19, many of the FinTechs will seek to have banking licences because that’s a viable way of having a revenue stream,” Boden says. One example is FinTech start-up Revolut, the fast-growing electronic wallet and payment card provider, which is applying for a European banking licence.

She also sees change afoot for the established big banks. “Many incumbent banks will have delivered new technology but are still coping with a cost base that is too large to support new revenue streams,” Boden says. “Therefore the pendulum in the big banks will shift away from innovation towards cost control.” This could mean they get left behind in the technology adoption stakes.

“In the longer term, there’s going to be pressure to change the business models of banks in light of open APIs, open banking and PSD2,” Boden says. “I think you will end up with traditional banks and with people like us, which are different business models where we work with Marketplace partners to offer solutions to customers. Some customers will have higher expectations of the technology they want to use and will also want more choice – they won’t want to be only buying products from an incumbent bank. The full-service banking model where one company provides every product is becoming outdated. Customers will be able to connect to several different companies and therefore be part of a new banking model where you can put together different products for different reasons.”

Even though Starling is leading the way with FinTech banking, Boden is aware that technology doesn’t stand still and the company is taking steps to future-proof its business. “We travel round the world talking to lots of technology companies about innovation,” Boden says. “It is so important to have these conversations to move the industry forward.”

Boden sees becoming truly digital as a challenge for traditional, longer established businesses. “Being digital is not something which is separate from an organisation – it’s a way of doing business,” she says. “The challenge for a big business is to understand that becoming digital is much more than just hiring a head of digital. It’s not something you can bolt on - it requires a lot of thought and work to really make it work.”

"We asked: Away from Starling Bank, what disruptive tech has most impressed you…Boden doesn’t hesitate in her reply, immediately identifying the new breed of digital assistant. “I’m a big fan of Amazon’s Alexa,” she says. “It now runs my home and my life. It even learnt a Welsh accent!”