Starling Bank

Starling Bank

Type	Private
Industry	Financial Services
Founded	18/6/2014
Founders	Anne Boden
Key people	John Mountain - Interim CEO
Revenue	+£452.8m (2023)
Net income	£194.6m (2023)
Website	https://www.starlingbank.com/

Starling Bank (/ˈstɑːrlɪŋ/) is a British bank operating in the United Kingdom. It offers a range of mobile banking services, including current and business accounts, personal loans, and various other financial products. It has won multiple national rewards including, but not limited to, the “Best Business Banking Award” in 2023 & Which?'s “Banking Brand of the Year” .

History

Starling Bank was founded by Anne Boden, a former executive at Allied Irish Banks with the aim of creating a modern, customer-centric banking experience. The bank received its banking licence from the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) in July 2016 . In May 2017, the bank launched its first mobile-only personal account, offering features such as real-time notifications and spending insights.

Recognition and Awards

Starling Bank's commitment to innovation and customer service has earned it several accolades and awards within the fintech industry. Notable awards include being named 'Best British Bank' at the British Bank Awards multiple times and 'Best Current Account Provider' by the British Banking Awards.

Strategy & Outlook

The main mission of Starling Bank is to provide a user-friendly, customer-focused, and technologically advanced banking experience. They aim to empower individuals and businesses with innovative financial solutions, giving them more control over their money and helping them achieve their financial goals.

The vision of Starling Bank is to be a leading digital bank that revolutionizes the way people manage their money. They strive to create a seamless and personalized banking experience through cutting-edge technology, responsive customer service, and a commitment to transparency.

Starling Bank's values are centred around putting the customer first and fostering a positive banking experience. Main emphasis on transparency, accessibility, sustainability and gender equality.

Product Line

Starling Bank is best known for its advanced mobile app, which provides customers with easy access to their financial information and allows them to manage their accounts seamlessly. Some key features and services offered by Starling Bank include:

Offering Features	Comment(s)
Current Accounts	Offers personal and business current accounts with no monthly fees. Customers can make payments, set up direct debits, and use their debit card for purchases worldwide.
Overdraft Facility	Eligible customers can apply for an overdraft, with clear and transparent interest rates.
Personal Loans	The bank provides personal loan options to its customers, making it easier for them to access credit.
Savings Accounts	Starling Bank offers savings accounts, helping customers save money and earn interest on their balances.
Spending Insights	The mobile app provides detailed insights into spending habits, categorizing transactions and helping customers understand their financial behavior.
Foreign Currency Accounts	Customers can hold and spend money in various foreign currencies using Starling Bank's app, making it convenient for travelers.
Business Accounts	In addition to personal accounts, Starling Bank provides tailored business accounts with features such as invoicing and integration with accounting software.
Payments and Transfers	Customers can make domestic and international payments and transfers using the app, including support for Apple Pay, Google Pay, and Samsung Pay.

Marketing and Partnerships

As an online bank, Starling engages the audience through social media platforms such as Twitter and tiktok. Advertisements are posted on TV, radio, podcasts and public transports. Starling Bank has collaborated with various fintech partners to enhance its offerings, including providing access to investment products and mortgage solutions. Partners include Weathlify, CreditLadder and Anorak.Sponsorship include hosting the Archery GB national finals, UEFA Women's EURO 2022, and Trillion Trees also further increase the company's brand awareness.

Expansion & Innovations

As it is the first digital-only bank in the UK, all infrastructure are virtual and therefore solutions have to be implemented for normal services to function such a comprehensive spending insight, in app bills management, a Card Lock feature as well as free Virtual Credit Cards. Other innovation include using data and machine learning for system security, fraud detection and behavioural analytics to better combat fraud.

Starling Bank has identified a substantial £53 billion opportunity in the core banking software market by licensing its advanced technology through Engine, its banking platform SaaS business. In 2020, global spending on core banking software reached £53 billion, and many major players faced challenges maintaining outdated technology while competing with digital banks.

With its powerful technology and proven capability, Starling Bank is uniquely positioned to capture market share through Engine. Other businesses can leverage this platform to build successful, profitable, and highly scalable digital banks, benefiting from Starling's innovative solutions and expertise.

Bar chart showing the Incomes/Expenses of Starling Bank

Starling bank has delivered a 6x increase in revenue relative to last year's FY with a private evalutaion of $1.5 Billion . Currently, Starling Bank current holds 9.4% and 2.4% in SME and retail market share respectively. While Starling Bank initially focused on the UK market, it has expressed intentions to expand its services to other countries. In 2020, it launched a beta version of its banking app in Ireland, marking its first step towards international expansion.

Main Income

In 2023, Interest is the main source of income for Starling Bank, accounting for 84% of £414mil, with 53% of Interest Income generated from loans and advances to customers primarily for mortgage.

For the Fees and Commissions Income, Customer card transaction revenue makes up for 83% of the £112mil. This then provides Starling with £74mil in Net Fees and Commissions.

Pie chart showing different sources of interest income and their significance

Compared to 2022, which also had a majority income in interests, there has been a significant increase in percentages of interest income from 65% in 2022

Funding rounds

Starling bank has had over 10 funding rounds, having raised an amount of $1.1 billion. The fundings are displayed in the table below, with the most recent one being on April 26th, 2022, raising £130.5 million by lead investor Goldman Sachs.

Date	Transaction	Money Raised (£ millions)	Lead Investor
26/04/2022	Series D	130.5	Goldman Sachs
19/04/2021	Series D	50	Goldman Sachs
8/03/2021	Series D	272	Fidelity Management and Research Company
28/05/2020	Venture Round	44.3	Chrysalis Investments, JTC
10/02/2020	Venture Round	60	-
23/10/2019	Venture Round	30	Chrysalis Investments
27/03/2019	Non Equity Assistance	-	Future Fifty
22/02/2019	Grant	100	Capability and Innovation Fund
13/02/2019	Series C	75	Harald McPike, Merian Global Investors
24/04/2018	Series B	10	-

The latest issuance of shares was towards existing shareholders, increasing the Group's Share Capital by £553, which was further increased during 2022 by additional issuances.

Corporate governance

Starling Bank is governed by the Board, which is comprised by executive and non-executive directors. The Board is responsible for setting the strategies and decision-making in regard to the stakeholders interests, and also ensuring the company's evolving in alignment with its goals and values.

Chair of the Board

David Sproul, Chair of the Board of Starling Bank

David Sproul

David Sproul was appointed chair of the board in June 2021. He has over 30 years of leadership experience in the financial and professional services sectors. He is skilled in strategy, risk management, M&A, and organizational transformation. Sproul served as Global Deputy Chief Executive of Deloitte, preceded by an 8-year term as Chief Executive & Senior Partner of Deloitte UK and North West Europe. He led the firm's global expansion and worked towards a more inclusive culture. Currently, he holds positions as a director of Safanad and BusinessLDN, and he is a senior adviser to Bridgepoint Group.

Senior Independent Director

Tracy Clarke, Senior Independent Director of Starling Bank

Tracy Clarke

Tracy Clarke was appointed to the position in May 2021. She has extensive international banking and financial services experience, having spent 35 years at Standard Chartered Bank. Her roles spanned leadership, compliance, human resources, corporate affairs, brand, and marketing. She eventually reached the position of Chief Executive Officer for Europe and Americas and Global Chief Executive Officer for Private Banking. Clarke holds directorships in TP ICAP, England Netball, and Acin, and she chairs SchoolOnline, an online learning platform. Additionally, she serves as a director and chair of the board remuneration committee, and a member of the board audit committee for Haleon, a consumer healthcare company.

Independent Non-Executive Director

Carolyn Clarke, Independent Non-Executive Director of Starling Bank

Carolyn Clarke

Carolyn Clarke was appointed a director in October 2020. She is an expert in risk, assurance, control, compliance, and conduct. With a background that includes senior executive and board positions, she previously served as the Head of Audit, Risk, and Control at Centrica and had a 20-year career at PwC. Her specialization lies in assessing the influence of people, behaviors, and culture on organizational risks and outcomes. Clarke holds the position of Vice President at the Chartered Institute of Internal Auditors and chairs the audit committees for two green technology growth companies, Elcogen Group and Agilyx.

Independent Non-Executive Director

Faisal Galaria, Independent Non-Executive Director of Starling Bank

Faisal Galaria

Faisal Galaria was appointed in June 2022, possessing over 25 years of experience leading teams in global consumer technology companies such as Spotify, Kayak, and Skype. He is well-versed in strategy, international growth, and digital transformation and has played a significant role in tech and Web3 IPOs in the UK and the US. In 2022, Galaria stepped down as the Chief Executive Officer of Blippar, one of the UK's first tech unicorns. He has also served as Senior Partner at Alvarez & Marsal, leading the Digital and Media practices across EMEA. Currently, he sits on the advisory board of Imperial College Business School.

Independent Non-Executive Director

Ian Jenkins, Independent Non-Executive Director of Starling Bank

Ian Jenkins

Ian Jenkins was appointed a director in October 2021. He has more than 35 years of experience in banking and financial services, with roles as a chief financial officer, chief risk officer, and chief operating officer at various institutions, including Diem Networks, HSBC, Santander, and Credit Suisse. As a chartered accountant, he offers diverse expertise in finance, risk, operations, and strategy to the Board. Furthermore, he is a member of the Board Audit Committee and the Board Risk Committee.

Independent Non-Executive Director

Marian Martin, Independent Non-Executive Director of Starling Bank

Marian Martin

Marian Martin was appointed a director in June 2019. She is a chartered accountant specializing in risk management. She served as the Chief Risk Officer of Virgin Money during a phase of substantial growth and strategic development, which included the company's listing on the London Stock Exchange. Apart from her current role at Starling, Martin holds non-executive director positions as the chair of the Board Risk Committee at Castle Trust and the chair of the Board Audit and Risk Committee at PPRO Holding.

Non-Executive Director

Lázaro Campos, Non-Executive Director of Starling Bank

Lázaro Campos

Lázaro Campos was appointed a director in June 2018. He is an experienced fintech investor and entrepreneur with over 30 years of global finance expertise. Previously, he held the position of Chief Executive Officer at SWIFT, leading its transformation into a commercially driven, innovative, and customer-centric cooperative until 2012. Additionally, Campos co-founded FinTechStage, a company focused on creating innovative ecosystems for global financial services organizations. Finally, he is a member of the Board Remuneration Committee and the Board Nomination Committee.

Non-Executive Director

Marcus Traill, Executive Director of Starling Bank

Marcus Traill

Marcus Traill is a director since December 2015. He started as an analyst at Bank of New Zealand and Owens Group. Later, he joined McPike Global Family Office (MGFO) and QuantRes, co-leading the Private Investments division of MGFO and contributing to various financial market quantitative trading strategies at QuantRes. He also managed the group's operations. Currently, Traill is a partner at Altered Capital, a venture capital and private equity fund manager. He is additionally a member of the Board Risk Committee, the Board Audit Committee and the Board Remuneration Committee.

Chief Executive Officer

Anne Boden MBE, Chief Executive Officer of Starling Bank

Anne Boden MBE

After an distinguished global career in financial services, Anne Boden MBE founded Starling Bank in 2014. Among her notable past positions, she served as the Chief Operating Officer of Allied Irish Banks, Head of EMEA, Global Transaction Banking at RBS, and Executive Vice President Europe, Transaction Banking at ABN AMRO. Boden, who holds a computer science background, is a Fellow of the Royal Chartered Institute of IT and joined the Prime Minister's Business Council and the Mayor of London's Business Advisory Board in February 2022. In recognition of her contributions to financial technology, she was awarded an MBE in 2018.

Chief Financial Officer

Declan Ferguson, Chief Financial Officer of Starling Bank

Declan Ferguson

Declan Ferguson became a part of Starling Bank in 2017 and was appointed to the role of Chief Financial Officer in 2022. In this capacity, he oversees the Bank's financial operations, including capital and liquidity management. Additionally, Declan handles strategic and corporate development, capital raising, and long-term financial and business planning for the Bank. Before joining Starling, he received training as a chartered accountant at PwC, where he led engagements related to turnaround, restructuring, and sale of European banks, as well as large loan portfolios and credit-related transactions involving UK and European banks.

Overview of the industry

Starling Bank is a British digital challenger bank, providing current and business accounts in the UK. A digital challenger bank is a type of direct bank that operates exclusively using online banking without any traditional physical branches. They provide a digital-first, digital-only, banking platform that promises seamless online experiences and low or no-fee services. According to recent research by Global Markets Insights (GMI), the neobanking market size exceeded $45 billion during 2021 and is predicted to grow significantly at a CAGR of 45% from 2022-2028.

Key market trends

Key challenges in the industry

Although the digital banking industry is rapidly growing, there are some substantial challenges in which the industry faces and must look to resolve or combat.

• Lack of face to face customer support - Neobanks offer all their customer support services digitally and while this may be quick and imminent, it is inconvenient for consumers who prefer face-to-face interactions. Complex banking scenarios can be made easier with the involvement of a personal banker which can help consumers with their options and find solutions tailored to their needs, which is may be difficult through an online service.
• cybersecurity - With digital banks operating completely online, they are vulnerable to fraud and cyber attacks. Fraud complaints against Starling, Revolut and Monzo have increased at a rate higher than customer growth, and higher than complaints at traditional banks. A neobank with poor security and customer protections would conceivably lose the public's trust and enormous business and revenue. Challenges such as account takeovers, chargeback fraud and loan fraud are all examples of criminal activity that digital banks are at risk from.
• Shifting banking habits - As a result of the pandemic, there has been a massive surge in online banking amongst traditional banks slowing down the leakage of consumers. While traditional banks offer services both in physical branches and now digitally, consumers will be less inclined to shift to neobanks unless they have a unique differentiating factor.

Risk assessment of the industry

Starling bank defines risk as any unexpected future event that could damage their ability to achieve strategic, financial or overall business objectives, including damage to earnings capacity, capital positioning, business reputation, cash flows, or poor customer outcomes.

The following are the important risks that have been identified:

• Operational risk - the risk of loss, whether direct or indirect, to which the bank is exposed due to insufficient or failed internal processes. They encompass the following sub-categories:
  • internal fraud;
  • People;
  • Customers, Products & Business Practises;
  • Legal;
  • Outsourcing and third parties

Starling has a suite of operational risk policies in which they go over the identification, management and reporting of the risks associated with the identified sub-categories of operational risk.

• Credit risk - the risk of financial loss to a consumer's failure to repay a loan or failure to follow contractual obligations. The bank has corresponding strategies for the different credit risk types in order to manage them. The bank is exposed to Retail & Commercial Credit Risk, and Wholesale Credit Risk.
  • Retail and Commercial Credit Risk - this is the current or prospective risk of a customer of the bank not following their contractual obligations. This risk is associated with the lending facilities which Starling offers to its Mortgage, SME and retail customers.
  • Wholesale credit risk - this arises from balance sheet management and investments in highly rated debt securities which are included within the High Quality liquid Asset portfolio. Starling does not try to heavily depend on any wholesale party to an extent in which a failure by that party would have a severe impact on the bank. Starling mitigates wholesale credit risk by operating within a limit framework set by the board.

• Liquidity Risk Management - this is the risk that starling, over a specific horizon, will become unstable to settle obligations when due. The primary causes of liquidity and funding risk for Starling are customer funding risk, in which the customer deposits balances fall, and the risk that Starling's liabilities do not grow as planned while assets grow faster than the business plan.

New projects being planned or developed

Ownership Structure

Private limited companies include characteristics such as main private individuals involved in the business and financial institutions investing through issuance of private shares. Representative of this type, Starling Bank is partly owned by Anne Boden, the founder, Harry McPike, a global private investor, and then multiple financial institutions such as Goldman Sachs, Jupiter, Fidelity, Railpen, Qatar Investment Authority and Millennium Management.

Competitve Analysis

Revolut:

Offerings: Revolut is a digital banking platform that provides a range of financial services, including multi-currency accounts, international money transfers, cryptocurrency trading, budgeting tools, and insurance options.

User Base: Revolut has a large and rapidly growing user base across various countries.

Features: Revolut offers unique features like "Round-Up," which rounds up transactions to the nearest whole number and saves the spare change into a separate account.

Strengths: Revolut's strength lies in its extensive international presence, multi-currency capabilities, and diverse range of financial services.

Monzo:

Offerings: Monzo is known for its user-friendly mobile banking app, offering personal and business accounts with features like instant spending notifications, budgeting tools, and fee-free spending abroad (up to a limit).

User Base: Monzo has a large user base, particularly in the UK, and has expanded its services internationally.

Features: Monzo provides budgeting tools that categorize expenses, and customers can create "Pots" to save for specific goals.

Strengths: Monzo's strengths include its user-friendly app, strong brand presence, and effective community engagement.

N26:

Offerings: N26 is a digital bank that operates primarily in Europe and the United States, offering personal and business accounts with features like mobile payments, real-time spending insights, and various savings options.

User Base: N26 has a significant presence in Europe and has expanded its services in the US.

Features: N26 offers unique perks and benefits based on the account type, such as travel insurance and discounts from partner brands.

Strengths: N26's strengths include its streamlined account setup process, competitive exchange rates, and growing list of partner services.

Starling Bank Salient Features:

Innovative Features: Starling Bank was among the first banks to introduce cutting-edge features like "Pulse" (real-time spending insights) and "Spaces" (savings goals within accounts), enabling users to manage their finances effectively.

Integrated Marketplace: Starling Bank's "Marketplace" offers a variety of third-party financial services and products through its app, delivering a comprehensive and customizable banking experience for customers.

Business Banking Solutions: Starling Bank focuses significantly on business banking, providing entrepreneurs and small businesses with a suite of tailored services, setting it apart from some competitors.

Transparent Pricing Structure: Starling Bank maintains a transparent pricing structure, charging no hidden fees for basic services, resulting in a more affordable and user-friendly experience.

Positive Customer Experience: Starling Bank enjoys a positive reputation due to its excellent customer service, intuitive app design, and responsiveness to client feedback, fostering a loyal customer base.

PESTLE Analysis

Political

• Regulation and compliance: Starling Bank, as a financial institution, operates under the scrutiny of various financial regulations, such as those imposed by financial authorities like the Financial Conduct Authority (FCA) in the UK. Changes in regulations can impact the bank's operations and may require adaptations.
• Brexit implications: As a UK-based bank, Brexit might have introduced changes in trade, financial regulations, and economic conditions, affecting Starling Bank's international expansion plans and access to the European market.

Economic

• Interest rates: Fluctuations in interest rates set by central banks can affect Starling Bank's borrowing and lending practices, influencing its profit margins and customer lending rates.
• Economic growth: The overall economic performance of the UK and the countries where Starling Bank operates can impact customer spending habits and their demand for financial services.

Social

• Digital banking adoption: The extent to which people embrace digital banking and mobile apps affects Starling Bank's potential customer base and growth prospects.
• Customer preferences and trust: Customer expectations regarding user experience, security, and transparency can shape Starling Bank's reputation and market positioning.

Technological

• Fintech innovation: The emergence of new financial technologies and innovative solutions can disrupt the banking industry and may require Starling Bank to invest in R&D or partnerships to stay competitive.
• Cybersecurity: With the growing threat of cyberattacks, ensuring robust cybersecurity measures is critical to maintain customer trust and protect sensitive data.

Legal

• Data protection and privacy laws: Compliance with data protection regulations, such as GDPR in Europe, is crucial for handling customer data responsibly and avoiding potential legal consequences.
• Anti-money laundering (AML) and Know Your Customer (KYC) regulations: Stringent adherence to AML and KYC practices is essential for Starling Bank to prevent fraudulent activities and maintain regulatory compliance.
• Environmental: Sustainability and green initiatives: Consumer preferences for environmentally responsible businesses may drive the demand for sustainable banking products or services. Starling Bank's commitment to eco-friendly practices could influence customer decisions.

Valuation