UK's Starling Bank reaches unicorn status

Hot on the heels of making its first profit, app-based digital challenger bank Starling has achieved unicorn status as its latest funding round takes its value over £1bn.

The latest £272m funding round, led by Fidelity Management & Research Company, takes Starling’s value to £1.1bn, making it the latest of a group of fintechs with values over £1bn, known as unicorns.

According to the UK bank, the funding will support the expansion of Starling’s lending in the UK, help it launch  in Europe, and support merger and acquisition activity.

Set up by former IT executive and digital banking pioneer Anne Boden, Starling received its banking licence in 2016 and launched the following year. In October 2020, it made its first monthly profit of £800,000 and in its latest month this has almost doubled to £1.5m

Following the latest round of investment, Starling Bank CEO Boden said 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,” she said.

She added that the new investors will bring experience to support the bank’s next stage of growth, adding that “the continued support of our existing backers represents a huge vote of confidence”.

Starling was one of the early digital challenger banks, and was set up by Boden, an IT professional who got into banking. She joined Lloyds Bank in the early 1980s and later headed up UK IT at Standard Chartered before spells at RBS and Allied Irish Bank.

As chief operating officer (COO) at Allied Irish Bank, she began implementing the ideas she’d had while working with small fintech groups. This was successful for the bank, but Boden wanted more – and realised the only way to get it was by starting from scratch with a new bank. She left and set up Starling Bank.

The Covid-19 pandemic accelerated the take-up of digital banking services, with Starling benefiting.

In November 2019, Starling had 926,000 retail bank accounts, 82,000 business bank accounts and held around £1bn in credit. By October 2020, it provided more than 1.25 million current accounts, 200,000 small and medium-sized enterprise (SME) business accounts, and holds more than £3bn in deposits.

It now has more than two million accounts for customers, including more than 300,000 small business accounts. Its total lending is over £2bn and it has more than £5.4bn deposited with it.

After a pause in its European expansion projects when Covid-19 struck, the bank got them going again as soon as August. Boden said the bank is currently “having conversations in France and Germany”.