Michael Fotis

How Starling beat Monzo to profitability

Image: Getty

The last twelve months have been rather good for Starling Bank. While its flashier rivals have struggled during COVID-19, Starling is now profitable, one of just a handful of FinTechs to achieve this feat. It has also strengthened its claim to be Britain’s best bank, having topped Which?’s latest best and worst banks list. But Starling now finds itself at a crossroads. What path will it take? And can it keep its edge?

Anne Boden, Starling’s enigmatic CEO & founder, has talked about wanting to float her bank, but it’s also clear that Starling is on the shopping list of some financial goliaths. Both Lloyds Banking Group, the UK’s biggest bank, and JP Morgan, which is set to launch a digital bank in the UK this year, have been rumoured buyers. Starling’s Board is also currently understood to be in talks with US asset manager Fidelity about a £100 million investment, as part of a larger fundraise, which would keep Boden’s bank independent for now. But Starling’s days as a privately owned business appear to be numbered.

Starling’s early pursuit of small business banking proved to be a canny move. Picking-up a £100 million grant in early 2019 from the Banking Competition Remedies (BCR), to increase competition in business banking, was the seminal moment for the bank. But the process has been controversial, with reports of intense lobbying and banking executives frustrated at the lack of transparency around the grants. Starling was also slow to ramp-up its business lending over 2019.

COVID-19 changed that. It allowed Starling to dramatically grow its business lending via the Bounce Back Loan Scheme, which is fully underwritten by the government. And while other banks slowed down new account openings, Starling has kept the gates open.

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