London-based Starling Bank is continuing to gather momentum. After a staggered launch of its current account kicked off in March, the digital-only bank is announcing imminent expansion to Europe, starting with the Republic of Ireland where it has attained a so-called “banking passport”.
The European-wide arrangement sees similar regulation mirrored across the European Economic Area’s 27 member states, helping to create something akin to a single market for financial services, which Starling founder and CEO Anne Boden tells me the challenger bank always planned to take advantage of.
In a call late last week, Boden talked up her banking experience and international credentials, reminding me that she previously headed Europe, Middle East & Africa across 40 countries for Global Transaction Banking at RBS, as well more recently being COO of Allied Irish Bank before making the jump to startup life.
With Starling having built out the tech infrastructure and actually launched a fully-functioning current account, including tying into banking payment systems, “the time felt right,” she tells me. More crucially, the thinking behind expanding Starling to a second country so quickly relates to its core product offering and business model, and “listening to customers,” Boden stressed.
This is seeing the challenger bank focussed on “doing one thing only and doing it well,” (a current account), with a marketplace model akin to an app store where third-parties step in to provide additional functionality. That’s very different to the way traditional banks try to up-sell you all of their own products, including savings, investments, credit cards, loans, mortgages and pensions.
In contrast, Starling’s revenue mode is based solely on lending customer deposits in the form of a transparent overdraft, and, in some instances, a revenue share or kickback from the companies it is partnering with for the Starling Marketplace.
It therefore makes sense to put the app into as many hands as possible since the core current account offering has very similar product and regulatory requirements across countries, in Europe especially.
That said, Boden wouldn’t reveal how many users Starling already has here in the U.K. alone, except to say it is signing up “thousands per week”.
“Building a current account is not for the fainthearted, it requires a lot of business expertise and technical expertise” she adds. “We’ve done it the hard work way by deciding to build it from scratch. I’m excited: we’ve managed to bring our product to market, we’re having great feedback, but it’s a long journey”.
Meanwhile, the new Irish offering will obviously be a Euro account, but interestingly I’m being told that multi-currency accounts are on Starling’s not-so-distant roadmap too.
I also understand that the challenger bank is gearing up for another funding round, aiming to raise somewhere between £20 million and £40 million. Banking is a capital intensive business after all, where your ability to expand is directly tied to your balance sheet in the eyes of the regulator.