App-based challenger bank Starling enters next stage of its journey

Thousands of people a week are downloading a new banking app on their smartphones to sign up for the services of app-based challenger Starling Bank.

Starling was designed by a banker with an IT background and 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.

Just over a year after gaining its UK banking licence with restrictions, and soon after the restrictions on its licence were lifted in April 2017, Starling Bank made its services available through its app.

Signing up is simple and can be done from a mobile phone. After downloading the app, customers are asked to video themselves speaking and then to send a photograph or a document containing a picture, such as a passport or driving licence. They can then get a sort code and account number and are sent a card. “We are now signing up thousands of people a week,” said Starling CEO Anne Boden.

The simplicity offered by the bank is attractive to people who live their lives on their mobiles. It is made possible by modern mobile, data and security technologies, often developed by startups in the sector now known as fintech.

Starling’s app is designed to make people’s lives easier with, for example, mapping technology and data analytics providing information, as well as functionality, such as being able to easily disable a card temporarily if required, rather than having to contact the bank to cancel it.

Starling Bank started life in 2014 as an idea by Boden to offer a current account entirely based on a smartphone, enabling customers to manage their transactions easily and providing data analytics services to give people a better understanding of their spending patterns.

A cultural change that has seen people increasingly live their lives on their mobile phones provided the potential customer base for the bank, the arrival of the fintech sector offered the technology to make the concept possible, and regulatory changes designed to spur more new banks to start up has provided the opportunity for entrepreneurs.

Predictions for the popularity of app-based banking appear to be right. Research from the British Banking Association (BBA) showed that more than 19 million people in the UK regularly logged on to mobile banking apps in 2016. It also found that last year, 86% more people used apps to manage their mortgages and investments than did so in 2015. Over the same period, use of app-based savings functionality rose by 30%, and credit card services via apps were accessed 46% more often.

Boden said Starling has been surprised by the profile of customers who have joined the bank. “We always expected it to be digital savvy people in their twenties, and although we are getting people who live on their mobiles, the age range is from 18 to 80.”

Beyond its own app, Starling offers its customers access to complementary digital services through the app marketplace it launched this summer, described by Boden as “the Amazon of banking”.

“Our intention is to offer the current account and then have a marketplace of other products from other providers developed using Starling APIs [application programming interfaces],” she said. “We have open APIs and can connect to other apps and services through the marketplace.”

So far these have included savings product Moneybox and payments system Transferwise, but there are many more in the pipeline, said Boden.

With the EU’s latest payment services directive (PSD2) now in force, bank customer data can be shared with other software developers when permission is given. “People from all sorts of businesses are coming together to see how they can use data in a new way to give people more value,” said Boden.

“A bank account is a rich source of data because every time you make a payment, you create data. We believe this data is owned by the consumer, not the bank, and PSD2 allows consumers to free the data if they want to.”

Starling’s future could see international expansion, said Boden. “What we have done here can be replicated in multiple countries.” The bank already has a licence in Ireland, which will allow its expansion in the EU. “We will use Ireland to launch our European proposition,” she added.

Starling’s international expension plan is evidence of confidence among challenger banks, which Boden said are growing more quickly than people had imagined. “There is a huge appetite for something different and compelling,” she said. “I think the traditional banks will copy all the new products coming out, but they can’t shrink fast enough to continue to serve customers at a profit.”

Boden has a BSc in computer science and chemistry, and an MBA. A member of the Chartered Institute of IT, she joined Lloyds Bank in the early 1980s when, she said, she was “doing fintech before fintech was fashionable”.

After Lloyds, her career has included a period heading up UK IT at Standard Chartered; being one of the original designers of the Clearing House Automated Payments System (Chaps); a role as a strategy and technology consultant at PWC; restructuring European operations at UBS; a period as global CIO for reinsurance at Aon; and running business in 34 countries for ABN Amro and subsequently RBS, which took over the Dutch bank.

But it was after leaving RBS in 2011 – to spend time working with startups to find out what was going on in financial services outside the big organisations – that Boden realised how banks needed to change. She joined Allied Irish Bank as COO and began implementing some of the ideas she had had while working with small fintech groups.

That was successful for Allied Irish, but Boden wanted more – and realised that the only way to get it was by starting from scratch with a new bank. And the time was right for Starling.