The Finanser Interviews: Anne Boden, CEO of Starling Bank

Starling Bank is the name of a new challenger bank being set up in London. The bank’s early days show how challenging the process of creating a new bank can be, as the Financial Times explains (see end of interview).  Nevertheless, there is grand ambition to shake up the banking establishment, as outlined in this interview with founder and CEO Anne Boden.

A lot of people haven’t heard of Starling Bank. Can you give us an introduction and background to what you are doing, and the plans for the bank?

We’re creating the first smart bank in the UK. A bank that focuses on making money easy for people, so that they can answer the important questions like “can I really afford this?”, send and spend money with friends, and avoid nasty surprises and ridiculous charges. It’s the next generation of banking focused on customers rather than products.

In terms of background, I started my career in Lloyds Banks in the early 1980’s, and the sad thing to say is that not a lot has really changed since then. The big banks have added some channels, and we’ve moved from branch to phone to internet to mobile, but the product, the model hasn’t changed.

At the moment digital banking is just like branch based banking on a screen. You’re provided with what comes down to a self service terminal, which is a bit like playing radio on a TV, or putting sales brochures on the internet… it kind of works, but we can do so much better.

We’re looking to make that leap. To create a truly smart bank that applies modern technology directly to solving customer problems, with a simple easy to use interface.

How will Starling Bank be different?

Retailing has been radically changed by Amazon, Broadcast TV by Netflix, music by the likes of Spotify, social media by Facebook, but banking is still stuck in the last century, because the big banks are stuck with hundreds of old systems, their legacy IT.

We all know that the vast majority of the banks today are based on technology built in the 1960 and 1970’s, enhanced in the 1980’s onwards. These systems have just had more and more channels and propositions layered on, but the core structure hasn’t changed and that’s the problem that they all have.

We’re not building a traditional bank, we’re not taking an off-the-shelf banking package and adding a prettier interface, biometrics, and video chat. We’re building services for digitally savvy customers that make their lives easier.

So yes, we’re starting from the customer needs and wants rather than starting from a specific product or a package. And that’s a big difference. It doesn’t constrain your thinking in old ways. It changes the game.

And the results are night and day. It’s the difference between looking up where you want to go, planning when you want to leave and phoning a taxi firm, versus pressing one button to book an Uber as you stand on the street. It’s banking turned upside down.

Customer driven and technology enabled. The bank for the digital age. That’s what we are really aiming to become.  

I am intrigued to know the vision of your bank model? Other banks are using multiple distribution systems from branch through call centre. Will that be part of your model?  Or are you a pure digital play on mobile, tablet and other devices of choice.

Our soon-to-be customers drive all of our decisions, and from the interviews we do a few times a week we’ve confirmed that the smartphone generation don’t want to go to a branch to deal with their everyday banking. They want to watch TV, pay a bill, check how they are doing, and be told if anything out of the ordinary happens. Otherwise they want banks to stay out of the way, so that they can get on with their lives.

So we won’t have branches, but we will deliver the best proposition on a mobile device. A smart bank that does an amazing job and stays out of the way.

You’ve mentioned the model of Amazon and Facebook, and the idea that you will be using Facebook. How will that work?

Successful Internet platforms have a lot to teach banks. From being able to sign up in a couple of minutes, to really elegant flows, and that continual push to improve, test, and develop ever better services. Banks obviously have regulatory constraints, and the need to deliver a rock solid secure service, but the lessons are still there.

In that respect we will be more like Amazon or Facebook than a traditional bank. But in terms of using and connecting with Facebook or any of the big Internet platforms, it’s an interesting question. We’re testing a variety of ideas on how customers might want to connect with us and with their friends. Most of are sceptical of any bank connecting with their social networks… rightly so, when you look at the current reputation of the big banks. But we are a very different kind of bank, and there are some interesting areas where it might work.

Will you be a full service bank from day one?

To begin with, we will be only offering a current account with a bit of saving and borrowing, We’re focused on helping customers with their everyday banking needs.

But the world is changing.  As I think I mentioned earlier, the old model of the big banks capturing a customer and then trying to sell them lots of different products through lots of channels is going away. There will be lots of new entrants taking pieces of the pie, and there will be a lot of disaggregation. We will soon see a very different model.  

How far have you got with your plans so far?

We’ve put together a world class team to deliver this proposition. It’s an amazing mix of  banking experts and start-up talent. We’ve got people from the big banks, GoCardless, Hailo, the US, Spain, and further afield. When you’re doing something this big with a real vision, the right people find you. We have offices in Farringdon, London. We are well into the banking licence application process, and we’re really taking off. The support from everyone is just amazing.

There are some other banks which are challenging the model like Moven and Simple in the States and Atom Bank which is also launching this year. Do you see yourselves as similar to those or any radical differences?

Simple and Moven blazed a trail. They were in that first generation of banking improvements, great veneers, bolted onto other peoples banking licenses, or traditional banking packages. They really pointed in the direction of what’s possible, and we’ve got a lot of respect for what they did.

We’re a group of people very experienced at running banks, together with a group of people obsessed with making a difference to customers, together with a group of world class engineers, and we’re creating a service, a platform built from the ground up for one purpose.

We’re the next generation. There is no veneer, no join. Just the most advanced real-time contextual banking system ever created with the purpose of helping customers.

As far as Atom is concerned, they say very little in public so I don’t really know a lot. I believe they are offering a product range on packaged software. Competition is good and the market is big enough for more traditional multi-product banking models such as Atom and ourselves.

What technologies are you talking about here?  Will you be offering wearables and such like?

The important thing here is to deliver what customers want. What we are creating here is a bank that moves at the pace of consumers.  In a traditional bank, an idea is created and a year or so later, it is implemented. The world is moving faster and faster, so things could be very different this time next year. We don’t know what is going to happen with the “internet of things” but we will be able to respond quickly if such a market develops.

The important thing is that we focus on what we do well which is to provide the best service for a product, and making sure we can plug into the other services. We aim to be quick: quick to respond in a timeframe that our customers expect from other industries, and in a way that we have never been able to achieve in the banking industry before.

Do you have a vision of where you will be in 2020?

I am highly ambitious and our sights are aimed at changing banking across the world.

There is a new generation of smart banks coming and we’re leading the way in the UK. The world of financial services will be radically different in 2020, there will be many niches, many players, and models we haven’t even seen yet.

The banks and companies that succeed will be those that can adapt the fastest to all of these changes, while staying completely focused on delivering truly great services for their customers.
People ask me what our secret feature is. Is there something that I can’t tell them about? And I tell them that it isn’t about secret features. It’s about fantastic execution and rapid adaptation. It’s about taking care of people and helping them take care of themselves by making money easy.

Since this interview took place, there have been a few changes at Starling Bank as outlined below.

Bank Possible’s future in question as Starling team flies apart by Sally Davies for The Financial Times, February 18^th 2015

It was called “Bank Possible”. The aim was to challenge Britain’s biggest lenders with a digital-only current account made for the smartphone generation.

But the founding team of the start-up bank, created last year by a former chief operating officer of Allied Irish Banks and a financial technology entrepreneur, has broken up before it even obtained a licence.

Renamed Starling late last year, the lender is one of a wave of “challenger banks” that have sprung up as regulators and politicians attempt to promote competition in the UK’s banking sector.

Now its future is in question after the departure this month of Tom Blomfield, the bank’s chief technology officer and co-founder, along with at least three of the senior management team.

Two people close to the situation said the individuals’ contracts had been ended following friction with chief executive Anne Boden.

The break-up of Starling’s team, which was hoping to gain a banking licence and launch by the end of 2015, exposes the challenges of taking on established lenders from within the hothouse atmosphere of a start-up trying to innovate in financial services.

“We think that time is up for the [big] banks,” says Toby Coppel, a partner at Mosaic Ventures, a London-based venture capital group. “But it is not easy to build an entrepreneurial, scrappy team that can build a truly disruptive product and also tick the right boxes with bank regulators.”

About 20 new lenders are in talks with regulators about obtaining a banking licence, according to the Financial Conduct Authority, prompted by the regulator’s move to ease the burden of capital and other requirements for start-ups.

But they face a historical lack of consumer enthusiasm to switch providers as well as the challenge of devising products and services better suited to the digital age without compromising customer trust.

The idea behind Starling was to offer a current account for smartphone users. Features include letting customers see how much they had spent on clothes or food each month, and enabling them to turn their bank card “on” and “off” with a tap of the screen.

The concept, as well as the combination of a seasoned financial services executive and a technologist, appeared to excite investors. The bank had held talks to raise about £100m — of which £3m-£4m would be used for the first stage of a formal regulatory application, according to two people close to the situation.

But the fundraising fell apart in January after a key investor, US-based Route 66 Ventures, discovered Starling had earmarked at least £1m of the initial £3m-£4m for consultants and advisers to help it with the approval process, the people said.

The high fees were partly triggered by Starling’s decision to build IT systems in-house from scratch, rather than buy software off the shelf — like other new banks such as Atom, a start-up digital lender, and Metro, have done.

Ms Boden, who played a critical role in assembling the Starling team and had previously worked at ABN Amro and AIB alongside two of the departed members, insisted on Wednesday that the lender would continue: “We are looking at the overall management structure, we are trying to figure out the best way forward, but Starling will continue,” she said. “We have made huge progress on our technology build and huge progress to preparing our regulatory submission. We are now in a situation where we need a different organisation with a different skill base.”

Mr Blomfield, who co-founded fast-growing payments group GoCardless, confirmed he was no longer employed by Starling but said he could not comment under the terms of his departure.

One person familiar with the situation said: “It wasn’t so much strategic differences of opinion. The breakdown came down to tension between Anne and Tom.”

Ms Boden, a former AIB and Royal Bank of Scotland banker, met Mr Blomfield at a dinner shortly after she left RBS in 2011.

“He was very reluctant to tell me the idea, he was very suspicious of me,” she told the FT last year. “I was in a world where we were trying to protect the status quo and he didn’t understand that status quo.”

As well as Mr Blomfield, the executives who have left include Gary Dolman, a former executive at ABN Amro who was Starling’s chief financial officer, and Paul Rippon, a chief risk officer who had worked at AIB as head of banking operations between 2012 and 2014.

Jason Bates, Starling’s chief customer officer and a former digital innovation consultant who had worked with clients including Facebook, Google and Barclays, has also left.

The departed Starling executives plan to build a rival service, according to people familiar with their plans, although it is unclear how the project will proceed given that detailed discussions with the regulators were conducted under Starling’s name.