One of the greatest pandemic-period fintech stories that continues to make headlines is the rolling success of Founder Anne Boden’s neo-bank Starling. A UK-based fintech and a true neobank—all digital, all virtual—Starling continues to impress by all measures of business success, from the growth of its user base to increased investor demand. Founded 7 years ago, Starling’s thesis is as simple if not as dangerous to legacy consumer banking giants: cash is not the optimal form of money, and with the ubiquity of WIFI and mobile devices, a cashless society is imminent. There’ll no longer be a need for brick-and-mortar banks since consumer banking, payments, small business lending, and a host of other fintech-based products and services will be transacted from a person’s mobile phone – easier to process, and in Boden’s opinion, more secure.
It was just this past December 2020 when we learned that Starling had outdone its peers – Monzo and Revolut – on the road to profitability; a major milestone that many banking experts thought wasn’t achievable for branch-less, all-virtual banks. But Starling’ leadership and execution under Boden has been flawless. While the pandemic forced incumbent banks to shutter branch locations, Starling was perfectly positioned to avail itself of the lock-downs and take on a major role in the UKs version of America’s PPP program, the Bounce Back Loan Scheme (“BBLS”). Starling became a primary distributor of BBLS funds, and unlike its legacy peers, found itself on the receiving end of accelerated growth via new account openings.
This past March, Starling achieved another newsworthy milestone as it took in a major funding round led by Fidelity Investments, Qatar’s sovereign wealth fund, hedge fund Millennium Management, and pension giant Railpen. The $376M round anointed Starling with unicorn status with a $1.5B valuation. Boden commented, “Digital banking has reached a tipping point. Customers now expect a fairer, smarter and more human alternative to the banks of the past and that is what we are giving them at Starling as we continue to grow and add new products and services…Our new investors will bring a wealth of experience as we enter the next stage of growth, while the continued support of our existing backers represents a huge vote of confidence.”
And this past week brought another high-profile round, this one $69M, from the growth equity division of Goldman Sachs. The same Goldman that shut down its newly reopened UK digital banking platform Marcus during the height of the pandemic. In terms of the appropriation of funds, CNBC reports that Starling plans to use the Goldman monies to expand its services in Europe and potentially seek a merger or acquisition. Further, Starling will likely resume discussions to secure a banking license in Ireland after temporarily putting talks on hold due to the coronavirus pandemic.
To quantify the striking success of Starling over the past 18 months, think of it this way: in the last year its deposits have grown from 1 billion to 6 billion pounds. Through its many attributes, including technology, product suite, open integrations to other fintechs, lending targeted towards SMEs, extraordinary leadership and flawless execution, it’s no wonder that Starling sits atop of the pandemic/ post-pandemic fintech success stories. It’s also no wonder why it’s attracting the attention of the biggest names in banking, including JP Morgan, Barclays, and Lloyds, which have all found themselves in the rumor mill this past year with respect to acquiring Starling.
To me, Starling Bank represents everything that’s wonderful about fintech. It’s not fintech capturing incremental market share by tweaking the existing banking paradigm, it’s fintech running roughshod over incumbent banking institutions by leveraging technology to create meaningful efficiencies, scale and a much higher quality consumer and small-business banking experience. Simply put, Starling is redefining banking, and its leader Ms. Boden, in true British fashion, has made a stellar case for why she’s the Queen of fintech.
– Adam T. Hark, Managing Director, Wellesley Hills Financial, LLC