The financial crisis was not just a wake-up call for the world’s biggest banks – for some, it was a sign of opportunity.
For Anne Boden, the CEO of British mobile-only challenger bank Starling, it was a time to totally rethink the financial services.
Speaking with CNBC at her London office, Boden looked back to when she worked as global transaction services lead for the Royal Bank of Scotland and recalled her introduction to the world of financial technology (fintech).
“While I was working on the aftermath of the crisis and turning the organization around to focus on customers much more, I learned about fintech, and I came across a number of fintech companies that were doing things with £30,000 ($38,618) that the big banks were doing with £30 million,” she told CNBC in an exclusive interview last Wednesday.
“And all of a sudden I realized that while the whole industry was looking inward on itself, these people had come up with huge opportunities to do things that were great and transformative for customers, and were really listening to customers and responding in a very agile way that was delivering new functionality and new experiences to customers using new technology.”
Starling doesn’t have a single physical branch, and relies entirely on a mobile phone app.
Its boss Boden boasts an extensive resume, having served in executive positions at UBS, ABN Amro, RBS and AIB.
Quitting her job
Starling CEO Boden took on the role of COO at AIB in 2012, at a time when banks – especially Irish lenders – were still reeling from the economic impact of the crash.
“Ireland was an opener. It was a country that had a really impactful financial crisis. The country had really been bruised by the banking industry, and I spent a lot of time talking to real customers about the impacts on their lives of financial services.”
She recalled moments that led up to her quitting her job in 2014, to focus on starting a new fintech project.
“I knew there was an opportunity to do more than the bank was doing. We’d gone so far and I wanted to go further,” she said.
“You don’t just build a bank overnight.”-Anne Boden, CEO of Starling Bank
There was “no single moment” that made her want to quit, but speaking with fintech entrepreneurs in Australia and the United States gave her a realization of how she wanted to change retail banking.
“I started thinking about a bank that really focused on doing a couple of things well, that was all about everyday transactional banking, the daily banking business, and what (would happen) if you used the information on each transaction, to give people insight into their overall lives.”
“So I quit my job,” she added. “And in 2014, I started the journey to build a bank. And it’s been a long process because you don’t just build a bank overnight. We’ve done things the hard way in that I’m a big believer that things that are worth doing are things that tend to be quite hard – because easy things anybody can do.”
Starling Bank employs only 110 people and relies heavily on engineers.
Boden believes that the challenger bank’s smaller scale operation gives it an edge over larger players, by significantly reducing the costs of running a bank.
“The big banks will try and copy everything we do,” she said. “The issue is, can they copy it and maintain and deliver it with small teams of people – hundreds of people – rather than with 10,000 people?”
Starling hopes to harness the potential of a new European Union regulation by using application programming interfaces (APIs) – codes which enable different financial programs to communicate with each other.
The EU’s Revised Payment Services Directive (PSD2) will force banks to open up their APIs and customer data to third-party firms next year.
“We can actually capture a huge amount of information, which we believe should belong to our customer rather than the bank. And we use that information to give our customer insight, into how they conduct their day-to-day financial affairs, and then we share that if the customer allows it, with other providers in our marketplace of products.”
Individuals and businesses involved in fintech refer to this idea as “open banking”.
“Implementing open banking and making this happen is not something overnight. It’s a tough journey for everybody, but in a world of open banking the customer can choose a provider in each part of the value chain,” Starling’s Boden said.
According to Boden, Starling is being watched by some of the world’s biggest banks – and she thinks they will try to copy its model.
“Everybody in the big banks knows very well that digital is important. Everybody is watching us, as people are very concerned about what the impact is going to be on their profitability,” she said.
Faced with the question of whether consumers would still maintain nostalgia for physical branches even as more turn to digital, Starling’s CEO said that some people still wanted a “reassurance” of speaking with a customer service team in person.
“We are aiming at the population that wants to do all their business on their mobile, and that is a very wide range of people of all ages, all sorts of demographics,” she said.
She predicts that banks will eventually “consolidate,” and be forced to share physical branch networks in the future.
“When you transform an industry, it’s nice to have friends around you.”-Anne Boden, CEO of Starling Bank
The challenger bank faces competitors from all sides, including the likes of Monzo – which boasts the talent of Starling’s former Chief Technology Officer Tom Blomfield – to alternatives like Tandem, Atom and Fidor.
“It’s great that we have competition and we have new entrants. If it was only us, it would be very strange. When you transform an industry it’s nice to have friends around you.”
But the entrepreneur added that Starling had more to offer customers than products which are being proposed to the market by mainstream financial institutions and other banking alternatives.
“If I was to compare it with most of the apps from the big banks and from the new digital banks, we are providing all the functions if not more,” Boden said.
The mobile-only bank currently offers a beta app on both Apple and Android app stores, and provides its customers with personalized current accounts. Customers go through a waiting list before being able to set up a current account.
Once a customer receives a code, they are able to set up a current account, and receive updates on a frequent basis.
“We’re constantly changing and getting better … every week you’ll have something extra and something special,” the bank’s boss added.
Boden gave CNBC a glimpse of what the fintech firm will be working on in the future.
She said that looking forward the bank would expand its current account infrastructure and was exploring the possibility of multi-currency accounts.
“We announced that we had our license to go into Ireland some weeks ago, back in June. And that means that we can then work on our multi-currency accounts. So you’ll be seeing accounts in multiple currencies from us very soon.”
For Boden, technology is a “huge enabler,” and the CEO added that, in future, the bank was hoping to revolutionize the way it looks at customer relationships.
“We believe that doing what customers want and focusing on customer engagement is important. We are a very vibrant community, where people are helping us help build Starling.”