Challenger bank sees huge growth during pandemic

App-based challenger bank Starling has seen a huge rise in its number of business and retail customers in the past nine months, despite the period being hit by the Covid-19 outbreak.

Its success is another example of an established fintech, with a diverse offering, successfully navigating the pandemic-instigated slowdown. 

In November last year, Starling had 926,000 retail bank accounts, 82,000 business bank accounts and held about £1bn in credits. But according to a letter to investors from the bank’s founder and CEO, Anne Boden, it now provides more than 1.25 million current accounts, 200,000 SME (small and medum-sized enterprise) business accounts and holds more than £3bn in deposits.

“Across our entire range, we’re adding a new account every 35 seconds,” wrote Boden.

She said the average retail account holder has a balance of about £1,500, while for SME customers, it is over £15,000.

The bank made a loss of £53.6m in 2019, which was double that of 2018, but expects to break even at the end of this year and be profitable next year. Starling’s turnover was about £24m 2019, but it expects to reach £80m this financial year.

After taking an initial hit from Covid-19, the company has bounced back.“Despite the coronavirus emergency leading to a drop in interchange income for several weeks, card volumes are back to pre-lockdown levels,” said Boden.

“This, combined with our lending and growth in other parts of the business, has resulted in a significant increase in our annualised revenue run rate, which now stands at £80m.”

Starling has increased its staff numbers by 352 since November and has added 147 people since the start of the lockdown. It now has just under 1,000 staff.

Boden said although the bank could not have been prepared for all the challenges brought by the pandemic, it was, and always is, “prepared for change”.

“At the time, we were putting the finishing touches to a slate of new products for small businesses, including lending products,” she said. “So when the lockdown started and small business owners needed emergency help, we were able to swing into action.” 

Starling has massively increased its lending under the government-backed Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme, said Boden. “Since the end of our financial year in November 2019, our performance has been strong. The biggest development has been the extraordinary growth of our loan book from less than £100m to more than £1bn.”

Starling Bank was designed by Boden, a banker with an IT background. It aims to use modern technology to make banking as convenient as possible, while enabling customers to benefit from the data they generate in their everyday lives.