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Starling Bank Deep Dive
- 1. DEEP DIVE o Overview oExecutive Team o Product Stack o Customer Acquisition o Marketplace o Banking-as-a-Service o Funding Trends o Financials o Customer Lifetime Value o Unit Economics
- 2. Founded: Anne Boden 2014 Founders: Total Funding:$470 million Latest Funding: $49 million – May 2020 Est. Valuation: Undisclosed Investors: Merian Global Investors, Banking Competition Remedies, Future Fifty, JTC Group HQ: London, United Kingdom Geographies Served: United Kingdom Ireland Licensing: UK - Banking License (2016) Customer Base: Retail A/c (1.34 million) Business A/c (200 thousand) 958 as of July 2020Employees: Partnerships at the core of Starling Business Overview Business Tools: Freeagent Quickbooks Xero Cybersmart Paystream Slack Sparqa Legal UnderPinned Wealth: Wealthsimple Wealthify PensionBee Penfold Other: Tail Bionic Insurance: Anorak Churchill Equipsme Nimbla So-sure Superscript Lending: Habito Molo Credit Ladder Zopa Funding Circle B2B Banking Services: SumUp Square PelicanPay Vitesse Flux Goji CreDec Mastercard Raisin Bankable Vocalink CurrencyCloud Form3 Railsbank Ditto
- 3. EXECUTIVE TEAM Led byAnne Boden, the Starling Bank executive team has an average experience of 22 years. Women make up for 50% of the team, while female representation stands at 41% in the overall organisation. Person ( 💁 indicates female execu0ves) Position Previous Experience Startups Founded (Before Starling Bank) Company Before Starling Bank Anne Boden 💁 CEO 32 years - Finance - Allied Irish Banks Tony Ellingham Chief - Finance 28 years - Finance - Nationwide Building Society John Mountain Chief - Information 14 years - Tech - BJSS Steven Newson Chief - Technology 16 years - Tech - Cahootsy Helen Bierton 💁 Chief - Banking 24 years - Finance - Santander UK Declan Ferguson Chief - Strategy 06 years - Consulting - PwC Rachael Pollard 💁 Chief - Growth 27 years - Marketing - Compare The Market Laurence Potter Chief - Risk 18 years - Finance - Direct Line Group Susanna Yallop 💁 Chief - People 18 years - HR - Eversheds Sutherland Alexandra Frean 💁 Corporate Affairs 31 years - Journalism - The Times Clare Nestor 💁 Operations 30 years - Finance 1 Royal Bank of Scotland Matt Newman General Counsel 20 years - Legal - Thomas Eggar
- 4. 2017 2018 20192020 PRODUCT STACK Starling Bank has built all its product capabilities from scratch & is committed to building 52 digital banking products in the near future. Covid-19 saw the business introduce need-specific products for customers. Retail Banking Business Banking Partner Products Mobile App Personal A/c Personal Overdraft Debit Card Mobile App Personal A/c Sole Trader A/c Personal Overdraft Business Overdraft Retail Marketplace SME Marketplace Intl. Payments Limited Co. A/c Joint A/c Web App Teen A/c Euro A/c Debit Card Debit Card Instalment Credit Business Toolkit Euro A/c Multicurrency A/c B2B Banking Services Connected Card Business Loans Mobile App Personal A/c Sole Trader A/c Personal Overdraft Business Overdraft Retail Marketplace SME Marketplace Intl. Payments Limited Co. A/c Joint A/c Web App Teen A/c Euro A/c Debit Card Debit Card Instalment Credit Euro A/c B2B Banking Services Mobile App Personal A/c Sole Trader A/c Personal Overdraft Business Overdraft Retail Marketplace SME Marketplace Intl. Payments Joint A/c Teen A/c Debit Card Debit Card Instalment Credit B2B Banking Services
- 5. 0 200 400 600 800 1000 1200 2017 2018 20192020 Numberofcustomersinthousands Starling Bank has a digital native approach to acquire customers through social media. Its recent efforts have been focused on growing its business banking division through active marketing. CUSTOMER ACQUISITION 100k 500k 1 Mn 10 months 2.5x 2x 250k 6 months 5 months 10 months 2x 1.3 Mn 100k 200k 50k 8 months 25k 5 months 6 months 8 months 2x 2x 2x Retail Accounts Business Accounts Starling Bank launched publicly in May 2017 with its mobile current A/c Business accounts were launched in March 2018 National TV Campaigns in Oct ‘19 & Feb ‘20 to promote business banking Growth in retail accounts can be attributed to one customer having multiple types of accounts 👪 37 years Average age of a customer 🏰 78% Customers from outside London in the UK 🧑🦳 88 years Eldest customer of the bank Aug 2020 Dec 2019 0.3x 8 months (Retail Accounts include Euro Accounts as well)
- 6. MARKETPLACE Starling Bank haspicked up steam with Marketplace integrations in 2019, adding 8 providers across retail & business offerings. In 2020, it has already introduced 9 new providers. Focus remains on SME services. 2017 2018 2019 2020 Retail Business MARKETPLACE INTEGRATIONS Close to 33% business customers have an active Marketplace integration in August 2020
- 7. BANKING-AS-A-SERVICE Starling Bank hasspent over £20 million on developing its banking technologies which run on public cloud infrastructure. It has 24 clients live on its banking services platform as of November 2019. £1,556 £213 £5 0 500 1000 1500 2000 Nov-19 Nov-18 Nov-17 Amount in £ ‘000 Income from Platform Services 7x growth Clients include fintechs, e-money institutions, banks, government, and corporates The number of payments processed by Starling Banking Services is said to be doubling month on month. Benefits for Business Clients Flexible API-based software-as- a-service (SaaS) delivery style. Utilize Starling’s banking license & access banking platform. Aids in regulatory aspects such as scheme compliance, AML & KYC. Payments Services Provides access to UK & EU payment schemes like Faster Payments & Bacs Account Services Various secured accounts for Payment Service Providers (PSPs) in UK, EU Banking- as-a-Service Provides building blocks of a banking offering to PSPs in the UK & EU The Offerings
- 8. FUNDING TRENDS Investors: VC/PE Individuals Accelerator /Institution Starling Bank is a proud recipient of the Banking Competition Remedies’ CIF Grant which aims to enhance SME banking in the UK. The fintech has further self-invested £95 million to strengthen its SME offerings. $68M $14M $97M $130M $39M $77M $49M 0 20 40 60 80 100 120 140 Jan 2016 Apr 2018 Feb 2019 Feb 2019 Oct 2019 Feb 2020 May 2020 Series A Series B Series C CIF Grant Venture Round Venture Round Venture Round FundingAmount($Mn) Starling Bank Funding Harald McPike CIF Grant As of July 2020, Starling Bank holds 3% SME banking market share in the UK. It is seeking an additional £35 million ($45M) from BCR to continue the momentum in SME banking. Total Funding: $470 Mn The CIF (Capability & Innovation Fund) Grant, administered by an independent body, the BCR, came from a £775M fund created by RBS & HM Treasury to boost competition & innovation in the SME banking market.
- 9. FINANCIALS The bank hasgrown its loan book multi-fold through government-backed schemes during COVID-19. While it still operates on net loss, it plans to achieve profitability by 2021 through improving revenue streams. 13 (19) 750 14,201 (4,253) (10,196) (25,070) (52,064) -75000 -50000 -25000 0 25000 2016 2017 2018 2019 Amountin£’000 Starling Bank Financials (in £’000) Net Income Operating Expenses Net Loss Income Expenses • Interest • Interchange • Marketplace Commission (2018) • Platform Services (2018) • Paid Products (2019, 2020) • Technology • Personnel • Operations • Marketing Starling Bank Revenue Streams Funds held at Central Banks & in Debt Securities, 94% 2% 4%6% Pre-COVID (Nov 2019) Overdrafts Term loans (Through Forward Flow Agreements) Funds held at Central Banks & in Debt Securities, 67% 3% 22% 8% 0% 33% During COVID (Aug 2020) Retail Loans BBLS Funding Circle CBILS Own CBILS Deposit Base: £1 billion Loans & Advances: £54 million Deposit Base: £3.05 billion Loans & Advances: £1 billion Deposits & Loans
- 10. CUSTOMER LIFETIME VALUE £900 £1,053 £1,450 £875 £1,500 0 500 1000 1500 0 500 1000 1500 2000 Aug2018 Nov 2018 Aug 2019 Nov 2019 Aug 2020 Numberofaccounts(‘000) Avg.AccountBalance(£) Personal Accounts £6,000 £7,000 £10,000 £11,600 £15,250 0 50 100 150 0 5000 10000 15000 20000 Aug 2018 Nov 2018 Aug 2019 Nov 2019 Aug 2020 Numberofaccounts(‘000) Avg.AccountBalance(£) Limited Company Accounts £900 £1,100 £1,600 £1,800 £2,850 0 50 100 0 1000 2000 3000 Aug 2018 Nov 2018 Aug 2019 Nov 2019 Aug 2020 Numberofaccounts(‘000) Avg.AccountBalance(£) Sole Trader Accounts Average Account Balance Trends (Dotted line indicates number of accounts) Starling Bank’s growing average account balance across customer segments puts them on a path to monetise their customer relationships & earn a higher customer lifetime value. A typical customer has multiple types of accounts across retail and business offerings. Retail Accounts Business Accounts o Personal Current Account o Joint Account o Teen Account o Euro Account o Sole Trader Account o Limited Company Account o US Dollar Account o Euro Account
- 11. UNIT ECONOMICS £211 £37 £34 £177 £47£51 £388 £84 £85 0 200 400 600 800 1000 1200 0 100 200 300 400 500 Nov-17 Nov-18 Nov-19 Numberofaccounts(‘000) Administrativeexpensesperaccount£ Administrative Expenses Trends Staff Costs per A/c Other Admin & General Expenses per A/c Total Administrative Expenses perA/c Number of Accounts Starling Bank began earning positive contribution margins from 2018, which grew 6.5x in 2019. Administrative expenses per account depict a stable trend. This combined with a growing contribution margin can help the company achieve their goal of reaching profitability by 2021. £3 £8 £18 -£0.44 £2 £13 0 200 400 600 800 1000 1200 -10 -5 0 5 10 15 20 Nov-17 Nov-18 Nov-19 Numberofaccounts(‘000) Income&expenseperaccount(£) Contribution Margin Trends Net Income per A/c (Contribution Margin) Total Income per A/c Total Variable Expenses per A/c Number of Accounts
- 12. Disclaimer: All data usedfor analysis has been taken from Starling Bank’s annual reports & other publicly available sources. All views & opinions mentioned are personal and do not represent views of any organisations or institutions. FINTECH FRATERNITY Afshan @heycloudwatcher /afshan-d Priyamoni @PriyamoniD /Priyamoni-debnath Sanjeev @sanjeevk_k /sanjeevk2012 THE TEAM PREVIOUS WORK Monzo Deep Dive SME Neo-banks Global Overview