As the palm of our hands increasingly become the center of our universe and our daily lives retailers are increasingly having to reimagine the consumer experience to meet our mobile needs. One world that has been slow to adopt mobile technology has been banking.
Sure there have been plenty of mediocre mobile apps out of the large institutions and bolt on tech products to make the banking experience appear ready to handle a new age of consumers, though the reality is there is still a long way to go.
One intriguing approach to changing the game of consumer finance is coming from Anne Boden, a lifelong financial services executive and innovation-centric femtech leader. Anne and her UK based Starling Bank team are launching a truly mobile bank that is ready to reshape how consumers are banked by the system. She is going back to square one and reshaping financial services for the better. SIC recently sat down with Anne Boden, check out what she had to say below…
AB: I think the important thing is I’ve had a long career in financial services and technology. But it’s just as important to forget the things you know than to use the things you know because things have really changed. The market in terms of customer protections, regulation and what technology can give customers is totally new from the world I worked in. For example, the majority of my financial services experience is with senior executives in the incumbent companies, so there is also a great deal I’ve never experienced.Moreover, a lot of the things that were true 10 years ago, 20 years ago, and 30 years ago, are no longer relevant nowadays. Consumers now work and live in a very different world where they have instant satisfaction of their desires. They can shop where they want, get music when they want, order a cab when they want. That is a drastically different world then we used to live in and has molded customers’ expectations.
What the individual now carries around on their mobile phone is incredible. With open APIs and utilization of fast technologies we can provide some powerful consumer experiences that integrate with their mobile life. Together, we’re in a regulatory environment that’s encouraging new entrants and innovation. It’s a whole new world and I am excited to be a part of it.
CL: For those who don’t know, can you define Starling Bank as a business?
AB: First off, Starling Bank is a fully licensed bank. We are the thirteenth member of the faster payments network in the UK and that gives us access into the UK’s main infrastructure for instant payment. This easily gives our customers the very best service in the industry and that’s very important to us. We’re a retail bank and we focus on serving the customers who live their lives on their mobile devices, and want to see their money in a whole new way.
We’re not a wholesale bank. We are a consumer focused bank that can provide a full range of products that can help you manage your everyday money transactions from your mobile device. We have a whole range of services to help you manage your day-to-day money to see your money better.
CL: What do you think is the fundamental problem that you are solving for consumers with your banking product?
AB: I think customers have been sold to for far too long. For as long as I can remember banking customers have been sold one product, than upsold another, and cross-sold another without anyone paying attention to whether or not that was the right product for the consumer.
What we have decided to do is focus on helping people get more out of their financial lives by understanding and seeing their day-to-day money. For us, it’s a challenge of really listening and really building something that’s specific to today’s day-to-day banking needs.
CL: Can you talk about your decision to go ahead and pursue a banking license rather than partner with another bank? What are some of the challenges you face in being independent?
AB: It’s very important to be a full bank with a full banking license. There are a number of new entrants in the marketplace with prepaid solutions, as well as neobanks sitting on the infrastructure or using the license of another bank. There a couple of things wrong with that model. First of all, you can’t really innovate and change the customer experience. You have to employ and live within the rules of the sponsoring bank.
Secondly, in the long-term it’s not a viable business model. In order for customers to get real value for money, we must be able to serve the customer at cost-effective prices and when there are too many people involved in the value chain, each taking their little profit, everybody pays more.
What we’re doing is coming up with a very efficient model that we can tune and morph into what really suits the customer’s need. Having a full banking license and not being dependent on a financial institution, means we have independence to offer better services and offer a better value proposition for your money.
CL: When we look at the unit economics of the Starling customer rather than a traditional banking customer, how much do you think you’d be able to improve the cost of acquisition by?
AB: I think the word “acquisition” is a traditional banking-oriented phrase. We don’t think our customers should be “acquired.” I think customers should choose us. I think if you look at the world on the basis of you’ll acquire a customer and then you will try and cross-sell them other products you are not servicing the customer correctly.
We believe that you must offer a customer something different, compelling, and new in the marketplace, so that it’s not about cost of acquisition. Customers make the choice to bank with us. That in it of itself will drive cost lower in building our consumer base that wants to bank with us.
CL: What is it about the technology capabilities at startups like your own that are enabling them to run leaner and more efficiently than traditional banks?
AB: I have a long career of working in traditional banks in technology roles and in leading business roles. What we do here is we do things in a very agile way. We are great advocates of sprints. We work in two weekly sprint disciplines where we really focus on what we can deliver in short periods of time.
The environment here is much more like a tech company than a bank. The majority of people here have a tech background. I have a computer science degree and most of the senior people here are very highly qualified tech specialists. We work in teams and those teams comprise people with financial backgrounds, technology backgrounds, engineering backgrounds, design skills and user experience skills. Those people come together as a unit and build functionality that customers love in two weekly sprints, something you won’t see at a traditional financial institution.
CL: What distribution channels will you use to get Starling accounts into the hands of users?
AB: We work with a number of a partners, but we believe that customers will find us rather than us finding them because we’re going to be relevant to their real life. It’s very important that we come, we meet with people, and we engage with them in their world. We don’t expect them to put themselves out to come to us.
CL: How does Starling Bank differentiate itself from other startups like Number 26, Adam, Tandem, and Monzo? Is it technology-driven? User-driven? User experience? What do you think is your differentiator?
AB: Well, the important thing to note is that we’ve built our technology from scratch and really focused on doing one thing really well. Atom and Tandem are using traditional banking packages and are producing much more of a traditional model. I think Number 26, Monzo, and ourselves, are much more technology-focused. Both Monzo and Number 26 started off by being prepaid card propositions; we, on the other hand, are a bank. We believe that the bank is necessary to be a bank, to offer the best product and to custom map and satisfy all their financial service needs.
CL: What other financial products would you like to offer users in the future?
AB: We’re focusing on building our marketplace where we will offer products that are suitable for our customer base. We believe in open platforms. We believe in ecosystems and we hope to be the center of the financial ecosystem for our customers.
CL: One of my beliefs is that variety is the key to preventing major market collapses like we saw during the housing crisis, when so few financial institutions held such a large portion of the wealth. Do you think there is an optimal size and quantity of banks that we should have in order to maintain more consumer protection and innovation?
AB: Yes, I think that what the UK has done post-Brexit is very supportive of that notion. As you know in the financial crisis of 2008 and 2009, lots of banks consolidated. Due to financial failure, new banks emerged while other banks disappeared. That led to a lack of competition in the marketplace. The result of that was the UK government introduced new bank authorization processes in 2013 to encourage new entrants to the banking marketplace.
This is also the case across Europe where a number of banks that have taken EU and IMF financial aid were encouraged to put in place support packages to allow more entrants into the marketplace. But to your question of whether there is an optimum size, I think there’s been a lot talk of too big to fail and that is an issue. But if you actually look at the details within most of the CIP4 Directive regulation, there is a huge amount of capital now being required to protect financial institutions in all phases of the economic cycle. So I think we are much better positioned now to prevent a crisis even if there is not a cap on the size of a bank.
CL: As you envision the future of consumer banking, do you think we’ll live in a world where startups like yourself will lead the way and larger banks will become more of a wholesale banking service provider doing the backend rather than being consumer-facing like yourself?
AB: I think that we’re going to go through a period of seeing many different financial institutions. If you remember what happened in the last 30 to 40 years, we started off with having lots of different banks and then we had the growth of the universal bank, the bank that did everything. Then, you’ve had various legislation to separate these organizations once again.
What I see from banking in the future is that we may have a situation where lots of banks basically become invisible to the end consumer. They may be supporting the day-to-day financial transaction, but the user will never know when they open the app and make that transaction that another party was involved. Even more interesting is the idea that transactions will be done without my guidance as I walk out of a store after shopping or as I pull out of a gas station, and simply be notified from my wrist whether or not I am within my financial railroad for that day. That may be the actual Internet of things, when payment becomes ubiquitous around us.
CL: In order to accomplish this goal of Starling Bank, will you be raising another round of capital in the near-term? If so, what type of investor partners do you look for?
AB: The interesting thing is that as organizations, the more successful you are, the more capital you’ll have to raise because you need capital to support your lending activity. We hope we can be very successful and will be looking for a lead to get lots of capital to fuel our growth in the future. But currently we don’t have a funding round on the horizon.
CL: If you could provide one piece of advice to someone considering starting up, what would it be and why?
AB: Do something really worthwhile. A startup requires energy, enthusiasm, and eternal optimism. You really want to do something that really matters to people lives and you’re really passionate about. A startup is all-consuming so you want to make sure you can make the largest impact you can with your work.
CL: As a female founder in a male-dominated industry, how do you view your role as a female leader?
AB: It’s a very difficult question. I think that as a female leader, things are tougher. My recommendation to very inspirational women that I meet is that you work twice as hard and you’re twice as ambitious, and it takes twice as long to get there but you’ll get through it in the end.
CL: Are there any challenges you face being a female in comparison to your male counterparts? What do those challenges look like?
AB: I think starting a bank is tough and starting a retail bank is even tougher. I think male and female CEOs would find it difficult. But I think the important thing as far as I’m concerned is that I have a chance to spend my time working with very interesting, very intelligent, very passionate women and men in an environment that’s supportive to both.
CL: How can we get more female involvement in the financial services space?
AB: I think it’s very important for women in financial services to say how much they enjoy the work and how much pleasure they get from it. Usually, you hear so many negative stories about women in financial services. It’s a great place to be. I have spent my whole career in financial services and in technology. I am having a fantastic career. Every day I spend in my job, it’s a job I really enjoy and I get a lot out of it. Let’s talk about the good side because there is an awful lot going on that is very exciting.
CL: If you could model yourself after one founder, who would it be and why?
AB: I can’t, actually. I think that if you think of all the big founders that have created organizations that have done something fundamental, they have performed really well on certain things and performed poorly on other things. None of us can be perfect. We all just need to focus on doing more good things than bad things.
CL: What was the catalyst for you to say, “Okay, I need to go create Starling Bank”?
AB: I’d spent 18 months with an Irish bank in Ireland, a bank that had taken a big bailout from the IMF, EU and the ECB. The failure of AIB and its rescue had a huge impact on Ireland and the Irish people. It was an opportunity to make sure that doesn’t happen again and to deliver a bank that’s going to get things right for people to be able to manage their day-to-day money. The most important things in people’s lives are their family’s health and their own health, and now, we’ve come to financial health. Financial health is important. It’s important that somebody works on that problem.
As you can see Anne is a seasoned financial expert with a passion for the consumer and innovation. At these crossroads she is poised to drive product innovation that is both compliant with regulation while also being consumer friendly.
I think Anne said it best when she said, “We don’t think our customers should be “acquired.” I think customers should choose us.” The reality is banks are often trying to sell you on the idea of getting free water bottles or electric shavers to join their bank, when in reality you should be choosing the bank not the perk.
Being acquired by a bank is an old school way of thinking about building a consumer base. Instead Starling Bank is focused on building a product so attractive that there is no way you wouldn’t want to use their service. That is a business with the fundamentals to reshape consumer finance.
Thanks Anne for all the great work you are doing and keep an eye on Starling Bank here.