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Anne Boden - Starling Bank at UK Fintech Week

Boden takes on high street banks at Fintech Week


Starling Bank’s Anne Boden reignited the core argument that underpins digital banking at UK Fintech Week and told the big banks to get back in their proverbial box. But the bankers had their say, too.

21st Apr 2021
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In a self-contained drama in UK Fintech Week yesterday, Starling CEO and co-founder Anne Boden accused the incumbent banks of failing to stay relevant.

Boden’s fireside chat with Streets Consulting CEO Julia Streets was anything but the dull media ploy that might have been expected. After slamming Chancellor Sunak’s visa system reform initiative, Boden revealed that she had gained a £15m investment from Goldman Sachs in a series D round of funding. And then she started laying into the incumbent banks.

When asked where she stands in the debate on whether legacy banks will survive in the face of competition from fintech alternatives, Boden responded that she was very glad not to be sitting in a boardroom of one of the big banks today,  “because I can imagine them. I was there, for 30-odd years, I was in a big bank trying to contemplate the future of banking”.

Boden told Streets that establised bankers are now sitting around trying to figure out what they are going to do next. Are they going to rip out and replace systems and put in new ones? That would probably delay them five, six or seven years, she said. Or are they going to try and compete with the newcomers with their own new cool brands? 

But the problem is, Boden continued, these conversations are taking a long time. “And whilst they are debating what they are going to do, we are basically taking their market share.”

Boden, now one of the UK’s leading fintech bosses, harked back to the early days of Starling Bank seven years ago, when few people thought she could win market share from the incumbents. Starling Bank now has 5% of the small business banking market in the UK.

“This is really happening,” Boden warned her rivals. “Big players are being threatened and are losing their market share to new players like ourselves. We are there with a great tech base, with a different way of engaging with customers and a business model that means we can actually provide our services in lots of innovative ways as well.”

Serving SME market needs

The SME market is the engine of the UK economy and has been always been a key focus for the financial sector and even more so through the financial turmoil of a world pandemic. For Starling’s founder, customer needs are changing and the banking industry needs to focus its attention on their time. 

Boden explained that Starling Bank focused on freeing up time for SMEs with connectivity tools such as the direct link from Starling’sbusiness account to HMRC.

“It’s surprising how many of the big banks spend most of their time trying to engage SMEs in processes and discussion they just don’t have time for,” she commented. “We need to get out of the way of these businesses and give them the services they need and ask for – not just sell them products.”

The banks respond

The incumbent banks got a chance to respond to Boden’s criticism later during a UK Fintech Week’s panel session, “How financial services respond to the demands for digital transformation”.

NatWest Group, Citi, Nationwide Building Society and Barclays all defended the legacy banking sector in Innovate Finance’s banking webinar.

While the bankers made little effort to defend on themselves the technology front and agreed that many elements in the banking could be enhanced, they sniped back at Boden by pointing out how few fintechs managed to turn a profit.

“One of the difficulties is fintechs have a runway – a burn rate – they’ve got backers who are looking for a return at some point,” said Nationwide Building Society CEO Joe Garner. The list of profit making fintechs in Europe certainly suggests the ROI for fintech investors is not a short term prospect. 

Garner recalled a conversation with a fintech founder who wanted to become the sector’s first social purpose unicorn fintech.

“OK, great,” responded Garner. “But the greater the demand for commercial return, the harder it is to bring that technology to solve problems of financial inclusion and capability.”

Garner countered Boden’s time-saving toolkits with Nationwide’s Open Banking For Good initiative that several fintechs using Open Banking to solve problems of financial capability. The  building society is also investing in Fair By Design, a socially fair fintech incubator. 

“I think the potential for technology to help people with the challenges around financial complexity are enormous,” said Garner. “But how can we make it easier for fintechs to progress down that pathway without the real demands of urgent financial return.” 

Banks rely on the ‘humanity’ defence

While investing in digital solutions, banking industry leaders asserted that they don’t walk around all day saying “The future is digital”, but shifted the focus instead to being human. “How do we use digital, not to automate personal service, but how do we use digital to enhance the human experience,” was the eseence of the legacy banking approach. 

“Our viewpoint is, we’re not trying to be an app,” argued Garner. “We’re not going to try and turn our entire organisation into an app. We’ve got decades and decades of experience and loyalty and, therefore, what we are increasingly doing is sprinkling the magic of that historic human branch service through chat, email and telephony.” 

Garner conceded that the average handling time for calls could be longer than expected, but asserted this was a good thing if customers wanted that extra time and “are getting a great experience”, avoiding any comment on views banking customer service. 

In contrast Citi head of UK James Bardrick appeared to agree with all of Boden’s accusations. “Keep pushing back every time, we have a tendancy to be a bit closed, a bit slow. All the things that we know we are,” he advised the fintechs on his tail.

“Just bear with us, be empathetic to us – know how hard it is to be very rapid in decision making, very flexible. We are trying, so keep at it and keep challenging us.”

The lending race

The David and Goliath struggle of fintechs against established banks is the bedrock of the ongoing fintech saga, which may never reach a final solution. A decade on, with government and RBS money behind them, the digital generation is making serious inroads into the legacy customer base, as Boden suggested.

But when the government and the British Business Bank turned to mechanisms to funnel coronavirus business support loans and bounce back loans to small businesses, their first instinct was to sign up the big boys. Digital lenders and platforms were added later but during the pandemic, the pendulum swung back visibly towards the incumbents.

Perhaps that experience provided the motivation for Boden’s next tactical move, which is likely to involve using some of its £6bn in customer deposits as collateral to acquire a player in the lending market. A lending business would extend Starling’s reach and money-making potential, expanding its service portfolio to match the giants, said Boden.

“We’re very keen on Europe. We’re probably not going to go to the States yet - the [US] is a very different business,” she added. “We’re very keen on our more complex products where we provide things like banking as a service.”


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