Starling Bank

London-based Starling Bank offers banking products for both the B2C and B2B segments via a web portal and mobile app, and operates under its own banking license.

The bank’s B2C segment offers current accounts, debit cards and personal overdrafts. The current accounts are provided free of charge, and customers also benefit from free ATM withdrawals and transaction fees when abroad. In addition, Starling offers teen bank accounts for 16- and 17-year-olds, and also allows parents to create debit cards for children aged 6–16 that are linked to their individual current account. Customers can also create up to five virtual cards that are linked to “Saving Spaces,” which are separate accounts for specific savings or expenses that are not connected to a customer’s main account. If a Space budget is used up, the virtual card will be declined instead of drawing funds from a customer’s main account.

Its B2B segment provides free business accounts primarily targeted at SMEs, which includes features such as fixed savings, overdraft facilities, and business loans. Additionally, Starling offers multi-currency accounts for individuals (euros) for free, while it charges GBP 2 and GBP 5 per month for Euro and US dollar businesses accounts, respectively. It also offers international money transfer services to 38 different countries at a 0.4% transfer fee and a fixed delivery fee of GBP 5.50. Starling Bank also offers Bills Manager features for personal accounts and small business accounts, which allows users with direct debit or standing order options and streamline and record finances that also automatically sync with other accounting tools such as Xero and FreeAgent provided through the Starling Marketplace. It also introduced a subscription-based Business Toolkit feature to support payroll, tax and supplier payments, which cost GBP 7 per month.

The company has also developed a Banking-as-a-Service (BaaS) platform called Engine. It is an all-in-one platform licensed to other banks to develop their own digital banking services such as checking accounts, savings, loans, and mortgages, rather than building the capabilities from scratch. The company was to use Engine as an alternative to expand internationally rather than launching its own retail bank.

In July 2021, Starling Bank acquired buy-to-let mortgage lender Fleet Mortgages in a cash and equity deal of GBP 50 million (~USD 68 million), with plans to leverage its lending operations to enter the mortgage sector, becoming the first entirely digital bank in the UK to do so. The acquisition (its first) is in line with the bank’s strategy to expand its line of credit products through strategic forward-flow arrangements, organic lending, and targeted M&A activity. In November 2021, Starling Bank purchased the mortgage book worth around GBP 1 billion (~USD 1.3 billion) from Kensington Mortgages. This was followed by the purchase of another loan book worth roughly GBP 500 million (~USD 607 million) from the defunct UK-based banked Masthaven in a bid to diversify its portfolio beyond government-backed Covid-19 loans, which accounted for GBP 1.9 billion (92.5%) of its GBP 2.0 billion SME loan book as of March 2022.

Key customers and partnerships

As of January 2023, Starling Bank served nearly 3.4 million customers (both B2C and B2B), which includes ~520,000 SME accounts representing 8.9% of the UK SME banking market according to the company.

Funding and financials

In April 2022, Starling Bank raised GBP 130.5 million (USD 164.4 million) in funding from existing investors such as Fidelity Management and Goldman Sachs. The company aimed to use the funds to support growth and explore more acquisition opportunities.

In FY2022 (ending 31 March 2022), Starling Bank’s total income grew 114% YoY to GBP 188 million (USD 259 million), primarily due to an increase in net interest income of 123% YoY to GBP 122 million. It reported its first year of profitable operations with a net profit of GBP 44.9 million in FY2022. The bank’s capitalization ratio (CET1) dipped to ~40% from ~48% in FY2021, while its liquidity coverage ratio (LCR) improved to 513% from 506% over the same period. Its profitability (Return on Tangible Equity - pre-tax) was 9.31% in FY2022.