Interviewed By The Asian Banker Live
Ben Chisell, product director at mobile-only Starling Bank, shares how the bank helps people gain better access to financial services using technology, and its strategies to achieve its plan to become the Amazon of banking in the UK.
Here is the transcript:
Ben Chisell: I think, I will talk about Starling from two sides, once is from the customer side and one is from the business side. So, starting with the customer, which is what we are always trying to do
We essentially want to build a bank that works for people and helps them live a healthier financial life
So that kind, means two things to us: One is there are certain banking basics that people need to do.
You need to be able to create an account, you need to send payments, you need to be able to use your money and spend it with a card and things.
And we just want to do all of those things better, a kind of customer obsession is something that we are really focused on at Starling and so anytime that it takes someone a bit too long to make a payment or they have to visit a bank branch to create an account, or they have to print out a form or something, we want to do all those things from the mobile app
So, we spend a lot of time trying to optimise the experience, to make the kind of banking basics easier, more efficient for customers.
And then we want to go further than that, and customers tell us that they want to be using their money for things that are really important to them and so we want people to live a healthy financial life. So, they use their money for the things that are important to them and we do that by building some features in the app, which we can talk more about, to allow people to budget in the app and kind of ring-fence money for the things that are really important to them and we try to help motivate them to achieve those things.
So, we’re really trying to build a banking product or a technology product that just helps people use their money for the things they really care about in the way they want to do that.
To be the “Amazon of banking” in the UK
And then from the business side, I think my kind of term, I am biased because I joined Starling a year ago from Amazon, I think we want to be the “Amazon of banking” in the UK.
There are currently three strands to our business: One, is the consumer proposition, which I have just mentioned.
But we have two others, which have very close analogy with Amazon. So, one of them is a marketplace, so from a business model perspective, we offer a current account with an overdraft, and that’s kind of all we’re planning to offer there, but we want to allow other financial services as partners to offer their products inside our app.
So, for example, if I am a customer and I want to put some money aside for a little while and I want to get some return on my investment, then we are going to be offering customers a selection of different financial services investment products, so they can choose which one is right for them.
So, you can imagine variables like the interest rate, the risk, like any fees on taking money out in these kinds of things so we want to present all of that in a very clear, and transparent way with good selection for customers, so that they can invest the kind of way they want
So, this is very kind of like Amazon’s decision to offer third-party products through Amazon.com.
In the spirit of providing the best selection to customers and kind of providing competition between sellers, or partners in our case, to kind of pass on the best deals for customers
Then, the third part is kind of B2B offering, so this is kind of our equivalent of AWS with Amazon, so we’ve started by launching a payments services business… so allowing… Because we are kind of a full-bank with a banking licence and direct connection to the payments schemes, we’re able to offer other organisations payments services. So, the first example of that is with the working pensions in the UK. They’re able to kind of send payments to individuals, to check if this is a real bank account
This is kind of a third strand to our business. So, the analogy is kind of similar to Amazon. So, in a way, we’ve got a great consumer offering and they are kind of great variety of different areas from a business perspective as well.
So, we don’t publicise our actual numbers. All I will say is when we first launched, we needed to launch in a responsible way. We are a new bank, and there are things we don’t know what’s going to happen. So, we incrementally open up the account to new people. To do that, we have this kind of queuing mechanism where someone needed a pass code to get pass it so we can throttle the number of people with the account; and we kind of had that in place for about four and a half months. And then we reached the point where we are confident in all of our processes. We were confident we could deal with the demand, a really strong demand we are getting for an account. We felt like we knew what was going on, so we kind of removed that throttling process and now we are really in the growth mode, where out of the improving our processes. And now we’re really going after things. So, while we don’t publish our exact numbers people will be able to see now that we’re going to be out more aggressively talking about who we are, what we stand for in terms of the financial health side of things and kind of using technology to improve the customer experience. And so, people are going to see a lot more from Starling over the next months and years.
One, the UK is a very mature financial services market, and so, but I think what that actually means is that people has started to accept mediocrity and the experience that they have. You know banks, while they have been around for 100-plus years, they haven’t really been known to innovate any experience. And you can see that with the apps and services that people have been launching kind of before 2014, there’s very little innovation in those areas. And so, what we see speaking to customers there is a huge pent-up demand to purchase better experiences and so you know from the feedback that we’ve been getting since we launched our app and the number of people we’ve seen switching their full-bank account using our kind of mobile-only current account switch service feature in the app; we just feel that our hypothesis is being reinforced by the data that we’ve been seeing. So, there is definitely competition there, but we’re up for the challenge and we are obsessed over providing better experiences, and we kind of see the one of main advantages is the speed that we can operate up. We don’t need to go through kind of annual planning processes. We can make decisions very quickly with the right people in the room and, as a result, we are able to be much more responsive to customers’ demands and kind of any changes in those than any high-street banks in the UK. In terms of the other challenger banks, I still think it’s actually really great for competition and for the credibility of the challenger bank kind of area that there are multiple, if there is just one bank doing it on their own then it would be probably more difficult to be taken seriously. The fact that there are a bunch of us in this together trying to innovate in the financial services sector, is actually a really positive thing, I think. In terms of competing against some of the other challenger banks, as you say, they do kind of stand for this better customer experience, I think we all are in slightly different situations in applying certain different tactics to trying to kind of grow. So, for example, you could look at a competitor like Revolut who kind of going down the route of building an app but they’re trying to use financial services products from high-street banks, for example, to plug in to their app so you can become a Revolut customer but you don’t actually have a current account. And so, what you see from them is kind of growing, adding lots of other products quickly, but actually they don’t own any of those things. Exactly! And so, it’s a slightly different tactic, but we actually see the presence of our banking licence being a really key advantage. Both from a kind of cost-perspective because we are not paying any third parties for each of the kind of debit card platforms or bank account acquisitions. So, we see our banking licence as a way that we can compete in the long term with someone like Revolut. And you know we’ve got competitors like Monzo, who have a long-term plan that’s very similar to Starling’s but they apply different tactics of launching with their prepaid offering and then following that up with a bank account. So, essentially that’s their, get the foot in the door with the prepaid card and then follow with the current account. They’re just different tactics and will kind of see which ones are the more successful. But they’re kind of one of the advantages of leading with the current account is that we don’t have to maintain two separate businesses and also, similar to that of Revolut, we don’t have the costs of kind of third party debit card platform for hundreds of thousands of people who are building the current account from scratch and building on one platform; which allows us to move faster. And, I think since we launched in the app store in May, we’ve actually started building up a huge amount of credibility with the speed of which we’re launching new features so for example, of all of the challenger banks we were the first to launch Apple Pay; first to launch Android Pay; got some other announcements coming this week in the similar area. We are also the first to launch a feature called “Goals in the app”, two weeks ago now… essentially giving people tools in the app to put money aside for the things that are really important to them and doing in some kind of more of a motivating way. We want to be able to provide all of these tools ourselves, and one of the advantages in building our platform ourselves without having any of these third parties is we can make decisions and build the technology quickly without dependence from either an engineer in perspective or a cost-perspective on a third party.
Open banking is key in Starling
I think, it’s making the challenge more interesting, but we as a bank really embrace open banking. So, as to say we only offer a current account and we want to be able to connect into other apps and services to provide our customers with selection and competition. So, we want to be creating almost an app store within our app of great financial services products; open banking helps us with that. But I think in terms of the disruption, there are really three things in addition to open banking. One is the kind of phased banking licence and being able acquire bank licence in stages so that we can kind of prove our systems before the capital requirements were massive and almost made it prohibitive. And then, the second is our cloud services, like AWS, the fact that the UK regulator allows us to build a cloud bank essentially, means that we can get things up to speed at a much lower cost again. If that wasn’t the case then it would be prohibitive to kind of build a bank from scratch like we’ve done. So, those two things plus open banking that really kind of spices things up in a competitive landscape in UK banking. I think in terms of your question about if this is a threat to challenger banks specifically, I am not sure. It’s going to mean the competition gets harder and people are just going to need to keep moving faster and keep doing things that are obsessed over providing a great customer experience and not just optimising for the bank. I think for some things that will happen, there’s an interesting dynamic between products that offer an aggregation service versus a bank. So, obviously, we want to build a great consumer app and a great bank account, which kind of maybe slightly separated and linked together with internal APIs but it will be an interesting dynamic about whether an aggregate way where you can have multiple bank accounts clicking in is something that customers prefer. So, I am interested to observe what happens there, but other than that, I think that open banking is just going to be an overwhelmingly positive thing for customers, where the partners who offer these services are going to have to compete against each other in a way that they haven’t had to do before. And that’s just going to mean that the selection increases for customers and it’s going to mean that the deals they get with investment products, or insurance, or mortgages and cashback, these kinds of things just get better and better. I think in a year’s time we’re going to see a huge amount of movement in providing great customer experiences. I think the other thing to add as well, so I was at a round table dinner last week where APIs and open banking were discussed and the interesting thing is that it still feels like a very theoretical discussion, where people are asking what’s going to happen; because we’ve taken a very proactive approach to open banking. So, we launched fully kind of PSD2-compliant APIs in April and we did that with the launch of a hackathon, where we saw a lot of people building apps and services using our financial services APIs. And we also launched our kind of first partner within our apps, so you can currently download the Starling app; you can link to a partner called Flux, who offer receipts in the app so you can see when you go to buy lunch, and you buy kind of brownie and a bottle of orange juice, you can see that broken down in the app. And so, while the bank is still talking about what’s going to happen, we’re already seeing the adoption rates of these kind of partners in the app. We’re also seeing… we’re able to observe interesting things like how thoroughly the people read the data sharing kind of agreement. Obviously, this is something people are speculating about, but we actually have data about the people scroll, the people read, how long the people spend on the page, where it says what data is going to be shared with the partner. So, I really enjoy the fact that we are not just being theoretical about it, we’re going back to the point about speed, we’re actually delivering this stuff. Ad so, while we do always enjoy talking about the theoretical side, we actually probably get more enjoyment over delivering things for customers.
Very exciting. I think Starling is really at the forefront of open banking. There’ll be more and more conversations over this in the next few months.
We’re ambitious, right? We don’t intend on being a kind of second-tier UK bank, right? We want to be a global technology company. So, we have passported our licence into Ireland, which is kind of a first step and we’re currently investigating the tactics for growing internationally. But more to come in the end of the next year and the start of next year on Starling’s international growth plans.
We need to change slightly, but if Brexit doesn’t change our ambitions for delivering great customer experience and with people’s money, it’s just an obstacle we have to overcome. And there have been plenty of obstacles that we’ve had to overcome so far, and there’ll be many more in the future as well. But our goal is to be a global tech company, and build products and features to help people with their money, and Brexit, it doesn’t change that.
There are some things that we see as very important that we do ourselves. So, you mentioned technology, we think we need to be really great at technology and we have an amazing engineering team. We deliver things very quickly, very high quality. Where it’s a really key expertise that we need to maintain and house. So, we essentially don’t want to outsource technology. We wouldn’t use another bank’s technology for that unless we could thoroughly afford it. The other way around. For sure, so as I have mentioned we have any financial services, any regulated company can go and integrate with our APIs. So, if someone wants to let’s say you have an account aggregator, they can integrate with our APIs, you get a secure kind of a wealth-exchange to provide the login information and then the banks can use those things. It’s exactly what open banking is designed to do. I can’t say too much more, but there’s going to be more and more of those kind of integrations as we grow our business-to-business (B2B) offering.
So, we’ve announced the business account and we’ve opened the waiting list for it, probably start of next year where we’ll likely be launching this to consumers.
Ultimately, everything starts with us trying to solve a customer problem. My anecdote with business accounts is reading the 18 hundred-page Competition on Markets Authority Report on Business Banking and the summary is that, while there’s a lot of progress in terms of innovation and invention in the personal current account market, business market has not seen any of that. You still see seven day plus waiting times to open a bank account. You still see fees for things that don’t cost the bank any money, whether it’s opening the account or making payments and so, this customer paying in terms of the experience they have.
Also, a lot of our customers have their personal bank and they also have a kind of sole-trader business or a small, medium-sized business that maybe they only employ of or maybe they have a few members of staff. But they still have the some of the problems that someone has with their personal finances, they don’t really want to be spending time doing the banking side of things, they want to be spending time building the right products for their customers. And so, we want to help those people, particularly if it’s someone who has both a personal banking relationship and a business banking relationship.
So, given that we have this model where we just offer the currents account, actually the way we see this going is the third parties who offer those capital solutions can plug in to our marketplace. So, if you’re someone who, a very small example, just opened a new coffee shop and you just want to get a new coffee machine then you could apply for credit with a third party for example.
BP: They could be a peer-to-peer?
Exactly, essentially, we want to provide the selection and the transparency and let customers make their mind up. And the other thing to add is, because we do own our own technology platform, we were able to make these decisions without any third-party dependency.
So, from a technology perspective, a business bank account and a personal bank account are very similar. Still, a container with a ledger that you need to hold money against, they still need to make payments and set up a direct debit and have a card for making purchases. And so, we’re able to look at the business opportunity, look at the technical cost and weigh all of those things without having to go and speak to a third-party platform, and ask to have new features in the next version of that platform, which isn’t going to be released for a year. So, we can make this kind of even bigger decisions very quickly relative to some of our competitors.
So, something that we are looking at right now, I think, this is probably if you are to ask the question in a month I would be able to give you a lot more detail, making an international payment is almost part of the core features of a bank account. It’s not something we offer now in our personal account but equally it’s something that people do a lot less frequently so we didn’t think it was something we needed to launch with, we wouldn’t delay launch without this feature, but it is something we’re actively doing at the moment. From a business perspective, we expect that this would be a feature that would be available when we launch the business accounts.
Goals and ambitions for a mobile-only bank
Lots of change. We launched in May, and since then, we’ve launched new features in the app, such as budgeting tools, goals, we’ve launched with Apple Pay and Android Pay and we’ve just been making continuous improvements to the app and really listening to our customers and refining our core product.
The point that we’re at now, we feel really great about it, and we are now in growth mode in our personal current account. Really, the next stage is kind of adding other strings to our bow, and so we’ve thought about business accounts, definitely part of our plan; kind of exploring international growth, that’s something that we’re looking very extensively at and more on the business-to-business side and the open banking and marketplace side. And so, really those four additional areas are things that you’re going to see a lot more news from Starling over the next six months. And then beyond that, it’s kind of a little bit too far to say but we’re confident we can deliver this kind of things in the timeframes that we’re talking about and then in three months’ time we’ll be looking at what’s going to come between six and 12 months. Now, we try not to have too much of a long-term planning process.
I think, for me, what it really comes down to is listening to your customers and going quickly. If you do those things, then almost everything else kind of falls into place. I think that often with companies, and I hear it in Money 20/20 this week, lots of people talk about this, but it’s very different actually living those things than just talking about them. It is very easy for me to say, “we’re customer obsessed and we go quickly,” but I actually feel that we live and breathe that at Starling, so if anyone wants to come and visit our office and spend a few hours, you’ll hear almost every conversation starts with the customer and we’re always thinking of ways that we can improve efficiency and go faster. Honestly, we just believe that everything else will fall into place if we do those two things. And if anyone wants to learn more, they can pick up the phone give us a call, they can come visit and will be happy to show people around and tell people more about what we’re up to.