Starling Bank will make profit “in January or February” next year, said Anne Boden, the founder and chief executive of the bank. This year is perhaps the most crucial in the bank’s short history. Boden has to manage expansion into Germany, France and the Netherlands, maintain the bank’s quality, and produce a profit. “Digital banks have experienced high growth,” says Boden. “We are all putting on numbers. This has never happened before in the history of banking. But now we are moving into a period where these banks have to show they can make profits.”
The digital bank has opened 1.25 million customer accounts and holds more than £1.25bn in deposits since it was launched in 2014. The digital bank has forged a reputation for bringing quality products to market across business banking, travel money or overdraft facilities that have won it the bank of the year awards. All of this has made Boden arguably the most famous woman in British fintech. However, Starling competes against UK rivals who have more customers such as Revolut which claims 10 million accounts and Monzo, which notched up four million accounts earlier this month.
Starling makes its cash from a mixture of charging fees on the cards it issues, its marketplace where it charges other financial service firms to sell products on its platform, as well as using its deposits to lend. “The thing to remember is that our cost base is so small the cash we raise is meaningful,” adds Boden.
The elephant in the room for all neo-banks is Big Tech firms such as Amazon or PayPal. These firms have deep pockets, large customer bases, and unlike high street banks, are platform companies themselves and so are comfortable with the business model. The number of fintech deals by global tech giants – including Alibaba Group, Alphabet, Apple, Baidu, IBM, Microsoft and Tencent – increased for the fifth straight year, with $3.5bn invested across 46 deals in 2019, according to last month’s KPMG Pulse of Fintech bi-annual report.
“I think Big Tech will want to distribute banking services, says Boden. “I don’t think they will want to get involved in the financial plumbing of moving money around. Or obtaining a license, that will mean more regulation, and they already face calls for more regulation as it is.”
