Learning to fly

If 2019 was a year of rocketship growth for Starling - we passed one million customer accounts and £1 billion on deposit, more than doubled our employee headcount to 900+, raised £205 million more in funding and opened three new offices - it was also the year we learned to fly.

Starting a company from scratch and growing it is one thing, but taking it to scale without losing sight of what makes it different and special is quite another. And that was one of our big challenges last year. It meant finding a balance between long-term success and short-term wins, between speed and precision and between creativity and process - all while staying true to our original goals: to build a bank account around customer needs.

It has meant hiring the right people for the right roles and refusing to be distracted from our obsession with customer service. It has also been about self-belief.

Take the £100 million we were awarded in February by an independent body created to increase competition and innovation in the market for small business banking. When the grant was announced, one or two commentators asked whether we were surprised. That was an easy one to answer: no.

We’ve always believed that financial technology can, and should, make banking for small and medium-sized enterprises (SMEs) quicker, smoother, fairer and more transparent; that it should put entrepreneurs in control and have customer support on hand 24/7, at precisely the moment they need it. So we put forward a case for making that happen, rolled up our sleeves and started making it happen.

Some of the milestones we passed this year include:

• Euro accounts for personal and business customers

• Debit card for spending in pounds or euros, both personal and business

• Multi-owner business accounts for limited companies

• Web app for business customers to do their banking on their laptop or desktop

• Overdrafts for business customers

• Freepost for cheques

• Marketplace partnerships with FreeAgent, Churchill Insurance, CreditLadder, Growth Street, Digital Risks, CyberSmart, Nimbla, so-sure, Anorak, Sparqa Legal and Quickbooks

• Banking Services partnerships with Goji, SumUp, Income Group and more

• Extra security for contactless payments, card magstripe payments and online with 3D secure

We stepped up our brand-building efforts last year with our first national TV campaign, in October, promoting our accounts for individuals and small businesses. It marked a real coming of age for Starling. The TV ads, featuring starling birds (fast, effortless, sociable and agile), were complemented by campaigns on the radio as well as on the London Underground and buses and billboards around the country. Prompted awareness of Starling rose from 22% to 38%, according to YouGov data, and we saw a sharp uptick in account openings.

We also signed the Authorised Push Payment (APP) Scams Voluntary Code, a new industry code that introduces new standards for minimising the number of APP scams happening and reducing their impact on customers. We were the only digital bank to sign. This kind of crime can have a devastating impact on victims. Even if the customer gets the money back from their finance provider, the organised criminal gangs which perpetrate these frauds may still profit from the proceeds.

We hope that new Confirmation of Payee rules, due to be introduced in early 2020, will act as a further deterrent against fraud. Under the rules, payment providers will check the name of the person or organisation given by the payer, against the actual name held on the account to provide an extra layer of security. It should help avoid misdirected payments being sent to the wrong account and help in the fight against fraud. In fact, we built the Confirmation of Payee function early and were ready to go with the original deadline in 2018. We were hugely frustrated that the deadline was repeatedly pushed back by the industry.

As we’ve scaled and become a more mature company, we’ve had to make hard choices. But we don’t not do things just because they are difficult. Last month, when we introduced a new overdraft pricing structure that would keep us competitive but mean higher charges for some customers, I personally wrote a blog explaining why we were doing it. I felt it was important to own the decision and that writing the blog would be better than slipping out the changes quietly, hoping nobody would notice. The changes are designed to reflect the true cost to us of offering overdrafts. Indeed, as we scale, we’ve never lost sight of the need to set Starling on a path to profitability.

This does not simply mean adding more customers (although that is crucial). It’s more complex than that and I have to say that I do sometimes wonder if those commentators on the fintech scene who prize customer numbers over quality of revenue, have been studying for the wrong test. It doesn’t matter how many customers you have if you haven’t figured out how to be profitable and are spending huge amounts servicing unprofitable accounts. What matters is how people are using your bank.

At Starling the average age of our customers is 35 for the personal account. Three quarters of active customers live outside Greater London; the average balance on active personal accounts is £932, with an average of £1,140 coming into the account each month.

The most popular merchants are supermarkets, suggesting that customers are using us for their weekly shop, not just for the odd espresso or only for holiday money. On active accounts for limited companies, the average balance is £11,675 with an average of £7,324 coming into the account each month. For active sole trader accounts, the average balance is £1,759 with an average of £2,303 coming in each month.

Our average annualised revenue is running at £40 per active account, while our annualised revenue run rate is £30 million and growing at double digit rates every month. We expect to become profitable by the end of 2020 and to have our first full year in profit by the end of 2021.

As we enter a new year and a new decade, I feel it is important to pause and reflect on the backdrop to our success. There’s no denying that it’s been a year of political and social division and one marked by declining trust in our public institutions. I, for one, hope that 2020 brings more kindness and tolerance all round.

It was my immense privilege this year to be invited to deliver the Lion Sermon in St Katharine Cree Church in the City of London. The sermon, now in its 370th year, is in effect an annual ‘thanksgiving’ speech. In my address I reflected on the seeming ‘awakening’ of big business this year that was sparked when the Business Roundtable, the organisation for CEOs of many of the largest US corporations, made headlines around the world by urging companies to consider the environment and workers’ wellbeing as well their pursuit of profits.

I’m sure there’s a good deal of self-serving cynicism behind much of what big corporations are now saying about ‘purpose’ and good intentions. But I believe that some of it is genuine, not least because businesses know that it matters more now to consumers. And for that I’m thankful because with any luck it will result in all of us in the corporate world being held more accountable for our actions.

I genuinely believe that one of the strongest things that London’s fintech community has going for it is its strength of purpose. We’ve built Starling to help remove the stress and anxiety from everyday management. And we are determined to make banking fair, safe and reliable, with no hidden fees or charges and no cross-selling of products that people don’t need. I know that others in the sector share our goals.

In June, I published The Money Revolution. It’s the first book to identify and explain the vast range of digital tools that are now available to help us all to work towards becoming debt free and more financially secure. It’s easy for people like me to get swept away by the relentless march of fintech innovations. But we must guard against the trap of living in a Shoreditch bubble and make sure that we build our products and communications around the needs of everyone in the UK.

That’s one of the reasons why we’ve opened offices outside of London - to bring fintech jobs and energy to different cities: Southampton, Cardiff and Dublin.

Looking forward to 2020, we’ve got big plans for our accounts for small businesses, with a host of new products and features coming very soon. In a world of big brands, it’s easy to overlook SMEs. Yet they make up the vast majority of businesses in this country and are arguably more important than any other group to our economic health and long-term prosperity. We’re here to support them. There’ll be lots of innovations for our personal customers too and more news on our international expansion.

As always, we’re grateful to our staff and to our customers for helping to make our progress possible. While many in the fintech world may have taken a break for the holidays, life for our customer service team carried on, with many working throughout the season to provide seamless support for Starling customers.

Thank you all.

Anne Boden

Founder and chief executive officer of Starling Bank.