Executive Summary:
Starling Bank is an online bank that provides private consumers as well as business owners with a variety of financial products.
Starling Bank makes money via subscriptions, interchange fees, interest and overdraft fees, transfer fees, referral fees, licensing fees from its API, interest earned on cash, as well as a variety of additional services.
Founded in 2014, Starling Bank has risen to become one of the U.K.’s leading challenger banks. It now boasts over two million accounts.
What Is Starling Bank?
Starling Bank is a FinTech company that offers a variety of financial products to both consumers as well as businesses.
Starling works just like a regular bank. Consumers can register for a free current account, which offers a diverse set of features, including saving goals, split bills, or free ATM withdrawals.
Users can, furthermore, create separate accounts for their life partners (joint accounts) or even children (named Kite).
Conversely, if you own a company, you can also create a business bank account, which provides you with accounting and bookkeeping features, business spending insights, mobile cheque deposits, and plenty of other advantages.
Both the personal as well as business accounts come with a free Mastercard debit card, which allows customers to withdraw cash or pay for goods and services.
Apart from its banking products, users can also apply for either personal or business loans via overdraft or by actually borrowing money from Starling.
All of the accounts that Starling offers are protected up to £85,000 by the Financial Services Compensation Scheme (FSCS). Users can access the bank’s 24/7 customer service should any issues arise.
As a neobank, Starling is primarily accessed via its mobile apps (available on either Android or iOS devices). Alternatively, users can also log into their accounts via the bank’s website.
How Starling Bank Started: Company History
Starling Bank, headquartered in London, United Kingdom, was founded in 2014 by Anne Boden, a banking executive with over 30 years of industry experience.
Boden, a native of South Wales who grew up in a modest household, graduated from Swansea University with a degree in computer science and chemistry in 1981.
Her banking career almost started almost accidentally. When she graduated, Boden actually wanted to get into defense or intelligence but her mother convinced her to at least go for one banking interview.
That one interview eventually got her into Lloyds Bank’s graduate training scheme where she ended up staying for three years. During the scheme, she helped with the creation of CHAPS, the UK’s first real-time payments system.
Over the next few decades, Boden held various senior roles at renowned banks, including Standard Chartered, UBS, or ABN AMRO.
In 2012, Boden moved to Ireland to become the chief operating officer of Allied Irish Banks (AIB). The bank was still suffering from the aftermath of the financial crisis and tasked Boden to modernize and completely revamp its infrastructure.
While her stint was somehow successful, it didn’t leave a positive mark on her. She saw first-hand how people, even years after the crisis, were still suffering financially. Many lost their jobs and, as a result, were not able to pay off mortgages or other financial obligations.
Boden decided to take another year off (she was on a one-year hiatus prior to starting at AIB) to travel the world. Being single and without children allowed her to visit a variety of organizations, such as Boeing Mutual, which offers financial services for workers in its aircraft factory in the United States.
She quickly came to the conclusion that she wanted to build a bank for the very same people that lost trust in the financial system. That was in early 2014.
To develop the bank that she envisioned, Boden recruited a variety of people with extensive experience in the financial industry. One of those recruits was Tom Blomfield whom she met at a dinner back in 2011.
At the time, Blomfield was one of the founders at GoCardless, a FinTech startup that allowed businesses to set up direct debit payments online. Boden even became an advisor to GoCardless.
Blomfield eventually left GoCardless in 2013 and joined a New-York-based dating startup. He eventually returned to the U.K. in 2014 to join Starling Bank as its co-founder and Chief Technology Officer (CTO).
Unfortunately, their relationship was marked by constant arguments and disagreements over how Starling Bank was supposed to be built. The tipping point arrived in January 2015 when Boden declined an investment after learning that the interested company’s co-founder had committed a serious crime.
As a result, Blomfield resigned a few days after. To make matters worse, he even staged a walkout and convinced other co-founders as well as software engineers to leave the company alongside him. Blomfield and the other employees went on to found Monzo, which became one of Starling’s fiercest competitors over the coming years.
Meanwhile, Boden all of the sudden found herself without co-founders and slowly running out of cash. First, she recruited another set of employees. After months of rejections, Bahamas-based investor Harald McPike invited her to his home to pitch the idea of Starling.
For three days straight, he fired various questions at her. At the end of the trip, Boden had secured a £48 million investment from McPike. However, this came at a serious cost for Boden. With the investment, McPike had acquired a majority stake (around 66 percent) of the company.
Nevertheless, the funding allowed Starling to meet the necessary capital requirements to secure a banking license, which it eventually did in June 2016. The banking license would allow the company to potentially offer a variety of financial services, such as issuing loans.
However, Starling’s initial strategy was to focus on one single product and provide a far superior experience compared to the incumbent banks. That product became its current account, which it launched into beta in March 2017.
The company, furthermore, announced that it would eventually launch a third-party marketplace. Other financial service providers, such as TransferWise, would be able to offer their products to Starling customers. The marketplace launched a few months later in September 2017.
Over the next coming years, Starling continued to add partners to its marketplace, raise more funding, and expand its product line. In March 2018, for instance, it launched business bank accounts for small and medium enterprises (SMEs).
A year later, in February 2019, Starling became the center of public backlash after securing a £100 million grant from the Banking Competition Remedies board. One of the board’s members, Aidene Walsh, had worked for Boden several times over the past 15 years and was even an advisor to Starling itself.
As opposed to Monzo and Revolut, which poured millions upon millions into advertising, Starling decided to mostly stay in the background. For instance, Starling launched its first TV advert only in October 2019.
However, its resourceful spending allowed Starling to weather the coronavirus crisis significantly better. While Monzo and Revolut had to lay off a significant number of its employees, Starling did not furlough any of its staff.
By the end of 2020, Starling Bank became the first profitable challenger bank in the United Kingdom. It broke even for the first time in October 2020.
With continued funding injections and profitability well into 2021, Starling was furthermore able to make its first-ever acquisition. In July 2021, it bought U.S.-based Fleet Mortgages for around $69 million.
Today, Starling Bank boasts well over two million current accounts while holding customer deposits of close to £6 billion. Furthermore, more than 1,000 people are now employed by the company.
How Does Starling Bank Make Money?
Starling Bank makes money via subscriptions, interchange fees, interest and overdraft fees, transfer fees, referral fees, licensing fees from its API, interest earned on cash, as well as a variety of additional services.
Starling’s business model has always been built on serving both individual consumers as well as a variety of different businesses.
To that extent, it has not only launched multiple business bank accounts but also implemented a marketplace that provides additional business tools as well as an API that companies can use for their own applications.
Let’s take a closer look at each of the firm’s revenue streams in the section below.
Subscriptions
Starling Bank charges a variety of monthly subscription fees for the different accounts that it offers to both consumers as well as business owners.
The personal current, as well as business current and sole trader accounts, don’t have a fee associated with them.
On the other hand, users pay a fee whenever they open a second current account (£2 per month), a Kite account (£2/month), or a USD business account (£5/month).
Furthermore, Starling charges a monthly subscription to its business toolkit, which provides company owners with accounting and bookkeeping features.
Interchange Fees
Whenever a customer uses their Starling-branded debit card to make a payment, a so-called interchange fee is being applied.
The interchange fee is being paid by the merchant that receives the payment, for instance, a restaurant or clothing store.
Interchange fees are equal to around one percent of the purchasing price. That fee is then to be shared with Mastercard, the issuer of its debit card.
Interest & Overdraft Fees
Whenever a personal account holder has an unarranged negative balance, he or she will be charged with an overdraft fee.
Conversely, if you have an arranged overdraft (i.e., the customer has agreed with Starling on the overdraft in advance), no fees will be charged.
Depending on the customer’s credit score, Starling will charge an overdraft of 15 to 35 percent on the negative balance. The overdraft is charged on a daily basis.
Apart from overdraft charges, Starling also generates revenue from the interest that it collects whenever it issues a loan.
Business owners can apply for a loan. They will then pay a monthly interest fee that is dependent on their account balance, (projected) revenue, credit score, loan period, and more.
Transfer Fees
Starling Bank also charges a variety of fees with regards to retrieving and transferring money. Examples include:
- A currency conversion fee of 2 percent when receiving Euro into a British Pound account
- A 0.4 percent currency conversion fee (plus local bank fees) whenever transferring British Pounds into a foreign account
- £5.50 per transfer that utilizes the SWIFT payment network
Starling imposes these fees as a result of foreign deposit requirements. For instance, if you aim to transfer your British Pounds into a US Dollar account, then there needs to be a financial institution, on the other hand, holding that USD equivalent in reserve. This financial institution then charges a fee for facilitating that transfer.
Referral Fees
In September 2017, Starling Bank launched an online marketplace for both consumers as well as business owners.
The marketplace allows users to connect their Starling account with third-party applications. For instance, business owners can link their accounts with Zettle for in-store payments.
Starling Bank generates income from the marketplace through referral fees. If a user signs up for a service through Starling’s marketplace, the partnering company pays Starling for referring that user.
Banking-as-a-Service
As previously stated, Starling Bank has always had its focus on serving both consumers as well as business owners.
In October 2018, it made an important step to fulfill that vision. It launched a Banking-as-a-Service (BaaS) product which would allow user companies to take advantage of Starling’s payment technology and offer it to their own customers.
More specifically, it introduced its so-called Starling API, which allows other businesses to tap into Starling account and transactional data and use it within their own applications.
While pricing is not made public, it can be assumed that Starling charges some sort of licensing fee for tapping into that API (much like Plaid does for its open banking API).
Dozens of businesses, including Square, SumUp, or CreDec, are now taking advantage of its BaaS offering.
Interest On Cash
Starling, just like any normal bank, uses the cash residing on user accounts to lend it out to other institutions, such as said banks.
They then collect interest from these institutions (also called Net Interest Margin). For 2019, according to Statista, net interest margin for all U.S. banks was equal to 3.35 percent.
This, furthermore, allows Starling to pay its users interest on the cash they hold in their accounts. Customers receive a 0.05 percent annual equivalent rate (AER) on balances below £85,000.
Additional Services
There are a few additional services that Starling offers. For instance, replacing a debit card costs £5 in the UK and up to £60 for overseas replacements.
Additionally, Starling Bank charges £20 whenever it has to certify documents pertaining to a customer’s account.
Starling Bank Funding, Revenue & Valuation
According to Crunchbase, Starling Bank has raised a total of $922 million across ten rounds of venture capital funding.
Notable investors include Goldman Sachs, JTC Group, Merian Global Investors, the Qatar Investment Authority, and many more.
During its latest funding round (Series D), announced in March 2021 (and extended in April), Starling was valued at around $1.9 billion.
Starling Bank has generated £97.6 million in annual revenue for the year ending on March 31st, 2021. Revenue has grown by close to 600 percent year-over-year. Loss after tax decreased by more than half to £23.3 million (from £52.1 million the year prior).
Who Owns Starling Bank?
As a company in private ownership, Starling Bank does not publicly disclose its ownership structure to the public.
Nevertheless, previous reporting has given some hints at its current cap table. Investor Harald McPike is still holding a significant ownership stake at around 40 percent.
He reduced his stake all the way from over 66 percent down to around 40 percent during the Starling’s funding round in March 2021.
Meanwhile, Anne Boden owns way below than 25 percent of Starling Bank, which is required to be classed as a “person with significant control” by Companies House since 2019.
Other shareholders include Fidelity, the US asset manager, the Qatari Investment Authority (QIA), or global investment firm Millennium Management.
If Starling Bank ever decides to go public, then its ownership structure will be revealed as part of the roadshow process.
FAQs
The Starling Bank Business Model – How Does Starling Bank Make Money? ›
Depending on the customer's credit score, Starling will charge an overdraft of 15 to 35 percent on the negative balance. The overdraft is charged on a daily basis. Apart from overdraft charges, Starling also generates revenue from the interest that it collects whenever it issues a loan.
How much money does Starling Bank make? ›The digital bank swung to a pre-tax profit of £32.1 million for the financial year ending 31 March 2022 from a pre-tax loss of £31.5 million for the period to 31 March 2021. Revenue for the same period to 31 March 2022 was £188 million.
Does Starling Bank make a profit? ›Starling Bank profit comes as UK FinTech investment continues. Some key Starling numbers as of July 2022. Boden added: “We're profitable, very well capitalised and have no need to raise money. It's no accident that we have never sought a silly valuation, even when the prospect of one was dangled before us.”
What makes Starling Bank so good? ›Starling Bank will show you real-time balances and send instant payment notifications so you can track your spending. You can access spending insights that give you a breakdown of your spending habits so you can budget better and understand exactly where your money goes.
How does the bank make money? ›Banks earn money in three ways: They make money from what they call the spread, or the difference between the interest rate they pay for deposits and the interest rate they receive on the loans they make. They earn interest on the securities they hold.
How does Starling Bank work? ›It works just like a regular bank with some extra benefits. You'll be able to withdraw money, set up direct debits and deposit money. You'll get instant notifications to your device every time you withdraw or deposit money, so you can easily track your spending. However, you won't be able to visit a branch.
How much money can you have in a Starling account? ›Per transaction, you can deposit up to £1000 per day, with no more than £250 of that in coin.
Is Starling Bank successful? ›Starling is also profitable, the marketing director is quick to point out, while Monzo hopes to break even this year. Starling achieved its first full year of profit in the year to 31 March 2022, posting a pre-tax profit of £32.1m on revenues of £188m.
Where does money come from? ›Most of the money in our economy is created by banks, in the form of bank deposits – the numbers that appear in your account. Banks create new money whenever they make loans. 97% of the money in the economy today exists as bank deposits, whilst just 3% is physical cash.
Is Starling an ethical bank? ›App-based bank Starling – voted 'Best Current Account Provider' at the British Bank Awards 2022 – says it expressly avoids funding fossil fuels, mining, arms and military, and instead invests in “government securities and other high quality liquid assets”.
What bank is better than Starling? ›
Starling vs Monzo - Summary
Monzo's budgeting features are slightly better than Starling's as you can set budgets for spending categories and there is also the option to get your salary paid a day early.
Starling Bank (/ˈstɑːrlɪŋ/) is a British bank, often referred to as a digital challenger bank or neobank, providing current and business bank accounts in the United Kingdom. Starling Bank is a licensed and regulated bank, founded by former Allied Irish Banks COO, Anne Boden, in January 2014.
Is Starling good to use in USA? ›Starling is great for travel. You can use your Starling card in a whole load of countries – almost anywhere you see the Mastercard logo, in fact! Unlike a lot of other banks, we don't add fees or charges when you use your card overseas.
Where do banks put their money to make money? ›They invest in real estate, commercial or consumer loans, and government securities. Banks might also invest in public companies. Read on for an in-depth explanation on how banks make money and more importantly, where the money they receive from consumer deposits and other transactions is invested.
Why are banks so profitable? ›Banks make money by accepting cash deposits from their customers in return for interest payments and then investing that money elsewhere. The bank's profit is the difference between the interest they pay their depositors and the yield they make through investing.
How do banks make money with low interest rates? ›Instead of earning money by borrowing and lending money, banks can turn to fees to boost profits. For example, banks can charge overdraft fees when customers try to draw money that they don't have from their accounts.
Can a US citizen open a Starling bank account? ›You can apply for a Starling account as long as you're over 16 and live at a UK address. We welcome all nationalities and you don't even have to be a UK tax resident. You'll need to download our app from the iOS app store, Google Play Store or Huawei AppGallery.
How to save money in Starling Bank? ›- Set a target amount, and add or withdraw money whenever you like.
- Tap 'Manage' to change the name, add an image, or start saving automatically with Round Ups.
- Tap 'Spaces', and then select 'New Space'
- Hit 'Saving Space' and then give it a name.
- Set a target amount, and add or withdraw money whenever you like.
Our Banking-as-a-Service accounts are protected by the Financial Services Compensation Scheme (FSCS) and allow you to develop your own financial product, fully supported by our scalable technology and secure APIs.
Who is Starling Bank owned by? ›LONDON, 25 May 2023: Anne Boden, founder of Starling Bank, is to step aside as CEO on 30 June and will remain on the Board as a non-executive director. John Mountain, Starling's COO, will take over as interim CEO to lead the digital bank into its next phase of growth.
How many customers does Starling Bank have? ›
Starling Bank has 2.7 million active users, most of which use it as their primary banking account.
What is the interest rate at Starling Bank? ›Earn 3.25% interest on your savings.
What technology does Starling Bank use? ›Starling is a different kind of bank. We're built in the cloud with RESTful open APIs that can be integrated into any existing platform or used to build new products and services while ensuring you remain compliant with PSD2 and the most recent data privacy standards.
Why are Starling closing accounts? ›We have reason to believe your account isn't safe
Keeping our customers safe is a priority. If we have any reason to believe your account, or money, isn't safe - for example, if you've granted a third party access to your account, or they've gained it without your knowledge, our teams will take the appropriate action.
The top-ranked business current account providers: Starling Bank (1st) Monzo (2nd) Handelsbanken (3rd)
How to become a millionaire? ›- Stay away from debt.
- Invest early and consistently.
- Make savings a priority.
- Increase your income to reach your goal faster.
- Cut unnecessary expenses.
- Keep your millionaire goal front and center.
- Work with an investing professional.
- Put your plan on repeat.
It is valued because it is legal tender and people have faith in its use as money. There have been many forms of money in history, but some forms have worked better than others because they have characteristics that make them more useful.
Who are Starling Bank main competitors? ›- Atom Bank.
- Greengage.
- Moven.
- Monzo.
- HMBradley.
- Cashplus.
- N26.
- Varo Bank.
- N26 Bank Account.
- MX.
- BankWorld Mobile.
- Finflux.
- bunq.
- Bankingly.
- Kony DBX.
- Alkami Platform.
When all of the details above are put together, Starling's SWIFT code comes out as SRLGGB2L (for our euro accounts the location code is 3L, which gives the SWIFT code SRLGGB3L).
Is Starling Bank owned by Russians? ›
100% independent. We're not owned by any other bank. We're part-owned by our founder Anne, employees and an employee benefits trust with investment from Harry McPike, a global private investor, Jupiter, Fidelity, Railpen, Qatar Investment Authority, Millennium Management and Goldman Sachs.
What is Starling Bank equivalent in USA? ›The UK: Starling Bank. The USA: Chime.
What is the difference between Chase and Starling? ›Starling supports Samsung Pay, but Chase doesn't. However, Chase customers can earn 1% cashback on card spending for the first year (up to £15 per month), while there's no cashback offered with Starling. Both Chase and Starling offer free ATM withdrawals in the UK, with daily limits in place. Winner: Chase.
Is Starling good or bad? ›Starlings damage apples, blueberries, cherries, figs, grapes, peaches, and strawberries. Besides causing direct losses from eating fruits, starlings peck and slash at fruits, reducing product quality and increasing the fruits' susceptibility to diseases and crop pests (Figure 2).
Can you withdraw cash from Starling Bank? ›We all need to deposit or withdraw cash from time to time. With Starling, you can use any of the Post Office's 11,500 branches (more than all the UK's banks and building societies combined) nationwide for all your cash needs.
What is the message of the Starling? ›Starling urges caution in trying to make yourself into someone else's image. You can lose yourself in the endeavor, no matter how sound your reasoning seems. Transformation is another theme from the Starling Spirit Animal.
What is the minimum deposit for Starling Bank? ›Our account does not have any minimum monthly deposit requirement, and no default fee. Some bank accounts charge their customers a monthly fee for having the account. The Starling Bank account does not have any monthly charge.
Does Starling accept all currencies? ›If you are sent a payment in any other currency then we will not be able to process the payment. Please also be aware that we do not accept payments from a small number of countries subject to sanctions.
How much money can you withdraw from Starling Bank? ›You can make up to six withdrawals per day, with a daily limit of £300. This limit cannot be raised. Should you need to make transactions over this amount, you can use your debit card for transactions up to £10,000 per day.
Where do millionaires keep their money? ›Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills. They keep rolling them over to reinvest them, and liquidate them when they need the cash.
Where can I get 7% interest on my money? ›
7% interest isn't something banks offer in the US, but one credit union, Landmark CU, pays 7.50% interest, though there are major requirements and stipulations. So, is it worth it?
Where do banks make the most profit? ›Commercial banks make money by providing and earning interest from loans [...]. Customer deposits provide banks with the capital to make these loans. Traditionally, money earned in the form of interest from loans often accounts for up to 65% of a banks' revenue model.
What is largest source of income for banks? ›Interest income is the primary way that most commercial banks make money. As mentioned earlier, it is completed by taking money from depositors who do not need their money now. In return for depositing their money, depositors are compensated with a certain interest rate and security for their funds.
What are three ways banks make money? ›- income from securities they trade; and.
- fees for customer services, such as checking accounts, financial and investment banking, loan servicing, and the origination, distribution, and sale of other financial products, such as insurance and mutual funds.
There are some upsides to rising rates: More interest for savers. Banks typically increase the amount of interest they pay on deposits over time when the Federal Reserve raises interest rates. Fixed income securities tend to offer higher rates of interest as well.
What type of investment do banks use to make a profit? ›The traditional way for banks to earn profits is by borrowing and lending. Banks take deposits from customers (essentially borrowing that money from account holders), and they lend it out to other customers.
Who benefits from low interest rates? ›When consumers pay less in interest, this gives them more money to spend, which can create a ripple effect of increased spending throughout the economy. Businesses and farmers also benefit from lower interest rates, as it encourages them to make large equipment purchases due to the low cost of borrowing.
How much is Starling Bank worth? ›Starling has raised £130.5 million from investors in a funding round that values the digital bank at more than £2.5 billion.
How many people are with Starling Bank? ›Share. 22 June 2022: Starling Bank has passed the three million current account milestone, which includes more than 460,000 small business accounts.
What is the richest bank? ›
| Rank | BANK | Total asset |
|---|---|---|
| 1 | Industrial and Commercial Bank of China Limited | $5.5 trillion |
| 2 | China Construction Bank | $4.7 trillion |
| 3 | Agricultural Bank of China | $4.5 trillion |
| 4 | Bank of China | $4.2 trillion |
We're a digital bank, so we don't have physical branches, however, you may be asked to provide an address for your bank account with us. If you've been asked for Starling's Address for Direct Debits, please use: Starling Bank Operations Team, 5th Floor Brunel House, 2 Fitzalan Road, Cardiff, CF24 0FG.
Is Starling Bank a Nigerian bank? ›...
Sterling Bank (Nigeria)
| Type | Public company |
|---|---|
| Headquarters | Sterling Towers, 20 Marina, P.M.B. 12735, Lagos, Lagos State , Nigeria |
With Starling, there are no monthly fees for our regular personal, business or joint accounts. And we don't charge you for withdrawing cash or using your card overseas.
Is Starling Bank only for UK residents? ›You can apply for a Starling account as long as you're over 16 and live at a UK address. We welcome all nationalities and you don't even have to be a UK tax resident. You'll need to download our app from the iOS app store, Google Play Store or Huawei AppGallery.
What is the minimum amount for Starling Bank? ›Our account does not have any minimum monthly deposit requirement, and no default fee. Some bank accounts charge their customers a monthly fee for having the account. The Starling Bank account does not have any monthly charge.