Revolut rival Starling Bank becomes first digital bank to reach profitability

Starling Bank Image credits: Starling Bank

Banks are undergoing a digital transformation right now to future-proof their business model and improve efficiency, customer experience, and economics. The rise of digitally challenger banks is causing global disruption as they traverse borders and disrupt the status quo in most of the emerging countries. 

Breaking even

In this regard, Starling Bank, a digital bank based out of London recently announced that it has become the first of the new breed of digital banks to break even. With nearly 1.8 million accounts, £4 billion in deposits, and £1.5 billion of lending, Starling expects to be profitable on a monthly basis going forward as it continues to grow and gears up to scale across Europe. 

Anne Boden, CEO, and founder says, “I’m equally certain that we will become a formidable competitor in the European banking market as we gear up to scale across Europe. We know that our technology is hugely scalable because our tech team runs a constant simulation at around ten times our current capacity. We’re prepared for a sudden influx of customers and transactions. In fact, we’re prepared for pretty much anything.”

Generated £9M revenue for October 2020

According to Anne Boden, CEO of Starling Bank, Starling generated £9 million of revenue for October 2020, which represents an annualised run rate of £108 million. This gave us a positive operating profit of £0.8 million for the month of October 2020, or £10 million on an annualised basis. 

The revenue is split £5.5 million of net interest income and £3.5 million of gross fees and commissions income. This represents a four-fold increase in revenue compared to 12 months ago, claims the company. Further, the operating cost for October was £8.1 million, with only a 30% increase in the past year while customer accounts have almost doubled.

Manage finances

Founded by Anne Boden, Starling Bank provides a mobile banking application and a debit card that enable users to manage their finances. Its application allows users to send money to their friends, save together for trips, and have total control at their fingertips. Its retail banking app offers personal, business, joint, Euro, USD, child, and current accounts on Android and iOS.

“Starling is, and always has been a team effort. We have a real advantage in that our talented engineers have built our tech platform from scratch. This means that if we need to change something, we can do it quickly, safely and efficiently in-house. We’re not like most companies where change is seen as a risk, so everything is done to minimise change. To us, the biggest risk is standing still and not changing, ” said Boden.