WEBVTT
00:00:00.160 --> 00:00:02.640
Okay, welcome back to another episode of Banking Without Borders.
00:00:02.799 --> 00:00:05.519
So three years ago, Starling Bank were beating Monzo.
00:00:05.759 --> 00:00:10.720
They had more revenue, they had more profit, and arguably they had the best free current account in Britain.
00:00:10.880 --> 00:00:17.120
There's no monthly fees, there are no pay plans, there's no upsell, and you can spend abroad with no markup.
00:00:17.199 --> 00:00:18.320
That all sounds great.
00:00:18.480 --> 00:00:20.000
Except they appear to be losing.
00:00:20.160 --> 00:00:28.399
Revenue is declining, customer numbers are stalling, and besides new AI features, important everyday banking products like credit cards are nowhere to be seen.
00:00:28.559 --> 00:00:32.799
At the same time, Monzo and Revolue are building entire ecosystems.
00:00:32.960 --> 00:00:44.000
You've got credit cards, investments, pensions, trading, crypto, eSIMs, mobile plans, and of course, paid accounts with millions of people happily handing money over every month.
00:00:44.159 --> 00:00:45.920
So what's happened to Starling Bank?
00:00:46.079 --> 00:00:53.200
Well, we've spent the last week going through their financial reports, and it turns out the answer isn't laziness or a lack of innovation.
00:00:53.280 --> 00:00:59.119
It's that Starling Bank built a business model that quietly rules out most of the products people actually want from a bank.
00:00:59.280 --> 00:01:06.159
But first, Jan, what fascinates me most is that the account is this good, yet the numbers look like a bank that's failing.
00:01:06.480 --> 00:01:07.519
Exactly right, Johnny.
00:01:07.599 --> 00:01:09.040
It's an extraordinary account.
00:01:09.200 --> 00:01:16.159
Not for the reason that it's very comprehensive, but for the for the reason that it's so um so cheap and so simple.
00:01:16.319 --> 00:01:22.079
Um it's literally free to use, there's no monthly fee, there are no tiers, it's no way to upgrade anything.
00:01:22.239 --> 00:01:23.599
It's a free account.
00:01:23.760 --> 00:01:25.760
Um, doesn't matter how much you use it.
00:01:26.000 --> 00:01:27.359
UK payments are free.
00:01:27.519 --> 00:01:30.239
You can pay abroad, of course, it for free as well.
00:01:30.480 --> 00:01:33.519
MasterCards exchange rate, there's no markup involved.
00:01:33.680 --> 00:01:36.959
You can use the ATM within the UK or abroad for free.
00:01:37.120 --> 00:01:38.719
Also, very generous limits.
00:01:38.799 --> 00:01:46.400
Um, and then overdrafts are extremely cheap as well, starting at 15% EAR, um, which is extremely good.
00:01:46.560 --> 00:01:51.120
Um, Monzo, on the other hand, I think has 19%, so it's 4% better than Monzo.
00:01:51.519 --> 00:02:00.000
Somewhat competitive savings accounts, although you could you could argue um that they're not as competitive as what's available on depositscout.com, of course.
00:02:00.159 --> 00:02:02.560
The easy saver is probably the one standing out of 4%.
00:02:02.959 --> 00:02:08.159
The app is extraordinarily simple to use while being kind of functional.
00:02:08.319 --> 00:02:14.080
So you have uh spaces, um, split payments are available, there's a builds manager.
00:02:14.240 --> 00:02:18.879
Uh also they started including AI really recently with spending intelligence.
00:02:18.960 --> 00:02:26.560
I know Johnny, you've you've criticized it in the past, you found it not as useful, but I I appreciate the fact that they're they're trying to innovate in that area.
00:02:27.280 --> 00:02:31.360
And now what really stands out is the support, I would say.
00:02:31.520 --> 00:02:32.960
It's all UK-based.
00:02:33.120 --> 00:02:40.960
I believe they're based in Cardiff in Southampton, and 24-7 accessible, which is something unheard of nowadays, right?
00:02:41.199 --> 00:02:47.439
New banks, they the the thing that they that typically sucks with them is the support, unfortunately.
00:02:47.599 --> 00:02:53.680
And that's just because support doesn't scale as well as you know everything else, because humans are involved.
00:02:53.919 --> 00:02:56.560
Yeah, and humans are expensive, very expensive.
00:02:56.800 --> 00:03:13.280
But there's a good reason why Starling Bank have been able to offer such a fantastic free account, and it's actually quite it's quite useful to know this because it does give us ideas about why certain products haven't been released and their business model is somewhat different to the likes of Revolute and Monzo.
00:03:13.759 --> 00:03:19.280
So Starling have made it their business to be very good at collecting cheap deposits.
00:03:19.520 --> 00:03:26.879
So they have around£12.7 billion in customer deposits and pay roughly 0.67% for that.
00:03:27.520 --> 00:03:29.439
So that's incredibly cheap.
00:03:30.080 --> 00:03:39.439
And what they're doing is they're taking their customer deposits, Yan, and putting them in places like the Bank of England where they can earn interest at around 3.75%.
00:03:40.240 --> 00:03:47.680
And last year, from interest income, they earned 758 million pounds or around 86% of total revenue.
00:03:48.240 --> 00:03:49.280
So this is huge.
00:03:49.759 --> 00:03:58.879
So essentially, they've got really good at paying customers very little in interest while earning a lot of interest themselves.
00:03:59.120 --> 00:04:00.639
And that's really important to know.
00:04:00.879 --> 00:04:11.360
So Starling aren't really giving you a free account, they're essentially just renting your money at about 0.67% and then putting it to work themselves at around the base rate of 3.75%.
00:04:11.759 --> 00:04:18.560
The worrying thing is, what will happen when the base rate starts to fall and that interest income starts to dwindle?
00:04:18.879 --> 00:04:19.680
That's right, Johnny.
00:04:19.759 --> 00:04:20.879
They have to become innovative.
00:04:21.040 --> 00:04:27.759
I think we we see engine um coming up, which is probably one way to tackle this, but they have to become really innovative.
00:04:27.839 --> 00:04:33.759
They have to look for other income sources, and that's something we can probably speculate about a little bit in the end as well.
00:04:33.920 --> 00:04:36.319
Where this is going, where this will be going.
00:04:36.800 --> 00:04:39.040
Will they launch pay tiers eventually?
00:04:39.199 --> 00:04:42.959
Will they have to come up with other products that earn income in some ways?
00:04:43.120 --> 00:04:58.319
I'm thinking of credit cards potentially, I'm thinking of investments within the app, pensions, some pay tiers, cashback, travel insurances, you know, making the product more versatile because those are things that are right now not available, right?
00:04:58.399 --> 00:05:00.240
Yeah, investments, huge cash cards.
00:05:00.560 --> 00:05:03.279
They've made it the brokerage businesses, right?
00:05:04.160 --> 00:05:10.399
They're offering some bolts-on products through their marketplace, which is clunky and full of friction.
00:05:10.480 --> 00:05:20.480
I mean, if you want cash back, you can link your account with the app called Verve, which is essentially just making like uh you know, you need to just have a styling account to get through the gate.
00:05:20.720 --> 00:05:22.480
I don't really know why you link your account.
00:05:22.560 --> 00:05:25.279
I don't know why you bother, but it's just retail-specific cashback.
00:05:25.360 --> 00:05:27.920
There's nothing creative or innovative or compelling about it.
00:05:28.240 --> 00:05:29.920
They don't have a loyalty point scheme.
00:05:30.079 --> 00:05:32.399
Jan mentioned the credit cards, that's not there.
00:05:32.560 --> 00:05:35.680
There are good reasons for some products being omitted, Jan.
00:05:35.839 --> 00:05:42.800
Because they are so reliant on interest income, so essentially holding what you could call liabilities on their balance sheet.
00:05:42.959 --> 00:05:50.160
So when you invest, say, a thousand pounds into your Starling account or you deposit a thousand pounds, Starling essentially owe you that money.
00:05:50.800 --> 00:05:51.920
That's a debt for them.
00:05:52.079 --> 00:05:56.000
And they've made it their business to have lots of liabilities on their balance sheet.
00:05:57.439 --> 00:06:09.600
But an investment product, like a stocks and shares ISA, is essentially just cannibalizing their business because it's encouraging their customers, Yan, to move money out of Starling and into the stock market.
00:06:10.319 --> 00:06:15.439
So they might be able to charge like a platform fee of 0.25% for that.
00:06:16.000 --> 00:06:20.000
I mean, not only that, would they have to actually invest in building the thing in the first place?
00:06:20.639 --> 00:06:24.800
But they're actually earning far more money from the interest income, like I already mentioned.
00:06:25.040 --> 00:06:25.439
Currently.
00:06:25.600 --> 00:06:26.560
Currently, good point.
00:06:26.800 --> 00:06:34.879
I think that's why they will never be able to launch their own investment product like Monzo or Revolut, because it will cannibalize their revenue.
00:06:35.040 --> 00:06:41.600
Which also, right, who's listening to this right now who would like to have or who likes to have all those things in one place?
00:06:41.759 --> 00:06:49.199
I like that with Monzo I can have my pension and my index funds in the same place as my current account and my credit card.
00:06:49.279 --> 00:06:50.959
I like having all of that there.
00:06:51.199 --> 00:06:58.399
And I think there are certain customers, Yan, that do want that, but Starling just aren't able to offer it simply because it would cost them too much money.
00:06:58.720 --> 00:07:01.360
I see this changing, Donnie, as you mentioned already.
00:07:01.600 --> 00:07:03.920
Interest rate will go down eventually.
00:07:04.079 --> 00:07:13.120
Um, it's I think it's now at 3.75% the the Bank of England's base rate, which is still somewhat high, but it will go down further.
00:07:13.279 --> 00:07:16.319
Um, that's pretty yeah, pretty sure.
00:07:16.560 --> 00:07:25.439
And um you also see it in in Starlink's revenue, the revenue they're reporting, that they're somewhat affected by by the interest rates already falling.
00:07:25.600 --> 00:07:43.120
Um, if you we can show it on the screen really quick, and everyone who's listening, in 22 they made 188 million, 23 453 million, 24, 682 million, 25, 740 million, although that was later on corrected to 940 million.
00:07:43.360 --> 00:07:55.759
Yes, and now 26, 887 million, so like six percent down compared to last year's 940 million, which is uh probably an indicator.
00:07:56.000 --> 00:07:56.800
Yeah, yeah, yeah.
00:07:56.879 --> 00:08:00.079
Well, we interest rates peaked at what 5%.
00:08:00.560 --> 00:08:05.920
I don't know the year off the top of my head, but they are starting to decline and it is impacting their revenue.
00:08:06.079 --> 00:08:13.199
And if you look at the divergence between Starling and Monzo, I don't really think we can include revolute in this because they're just racing ahead.
00:08:13.360 --> 00:08:13.600
Yeah.
00:08:13.839 --> 00:08:19.279
But in year ending 2024, Monzo started to get ahead of Starling.
00:08:19.600 --> 00:08:25.120
And to the point by last year, in terms of revenue, Monzo have double the revenue of Starling Bank.
00:08:25.199 --> 00:08:30.319
And Monzo are also making a decent amount of money, Jan, from interest income from customer deposits.
00:08:30.480 --> 00:08:34.320
But they're also making a significant amount of money through subscriptions.
00:08:34.879 --> 00:08:39.919
Something that Starling seems to be refusing to do, to have paid tiers.
00:08:40.000 --> 00:08:44.799
They've made it their thing about being kind of the everyday free bank, essentially, which is fantastic.
00:08:45.120 --> 00:08:55.919
And it's okay while interest rates are at a point where you can afford to pay for all of that, but at some point the base rate, I hope, will continue to come down.
00:08:56.159 --> 00:08:58.559
But I don't know if Starling Bank would like that.
00:08:58.879 --> 00:09:07.679
Do you like having subscriptions available to you if you would like to access them through a paid tier, or is it something that you uh typically would not take advantage of?
00:09:07.919 --> 00:09:09.759
I'm thinking about me personally.
00:09:10.000 --> 00:09:12.559
Well, I'm not quite sure to be honest.
00:09:12.639 --> 00:09:16.240
Um, I like the fact that Revolute Metal, for example, is very versatile.
00:09:16.480 --> 00:09:19.200
A lot of subscriptions included that I would use on a daily basis.
00:09:19.360 --> 00:09:25.440
Just thinking of a VPN, for example, or in the past, perplexity, which is not in there anymore, but it's another story.
00:09:25.679 --> 00:09:26.799
So I'm thinking about it.
00:09:26.879 --> 00:09:35.519
Like, is that something that customers would appreciate it, would appreciate, or is it something that you know would rather cause negative PR for Starling?
00:09:36.320 --> 00:09:37.279
What's your take on that?
00:09:37.919 --> 00:09:53.120
I I think if it helps feed the free account, keep it going, you know, keep keep Starling and as the sort of headline best travel card in the UK or one of the best, you know, keep Starling's support being uh you know so accessible.
00:09:53.279 --> 00:09:53.919
I think so.
00:09:54.080 --> 00:09:55.039
I'm happy for that.
00:09:55.120 --> 00:09:58.000
You know, that's not a story you can necessarily sell to your customers.
00:09:58.159 --> 00:10:02.480
Many people won't understand the economics behind everything, but I would be happy for that.
00:10:02.639 --> 00:10:11.440
I would even be happy to pay Starling money if it was in order to receive subscriptions, which essentially when bundled, I'd be getting for less than I'd pay if I was getting them individually.
00:10:11.600 --> 00:10:11.840
Right.
00:10:12.000 --> 00:10:12.960
That sounds fantastic.
00:10:13.039 --> 00:10:23.519
And when you think about these economics, you think about like Revolute that still don't offer a decent free account, but have a ton of subscriptions and a ton of subscription revenue.
00:10:23.679 --> 00:10:32.000
Now I don't want that for Starling, but I also don't want to see Starling's free account go away, mate, when the base rate starts to really decline.
00:10:32.320 --> 00:10:39.039
One thing I find fascinating are their marketing costs, Johnny, because it doesn't take Starlink, it doesn't cost Starling a lot to acquire customers.
00:10:39.200 --> 00:10:47.120
I think their marketing expenses are 17 or were 17.6 million pounds in the last financial year.
00:10:47.440 --> 00:10:51.759
Monzo, on the other hand, they spent 150 million pounds somewhat.
00:10:51.919 --> 00:10:54.639
Um so it's kind of and Revolute.
00:10:54.720 --> 00:10:55.519
Don't forget Revolution.
00:10:55.679 --> 00:10:56.799
Revolute half a billion.
00:10:57.039 --> 00:10:58.320
Yeah, we want to include it.
00:10:58.399 --> 00:10:58.960
Half a billion.
00:10:59.039 --> 00:11:02.240
So compare 17.6 million to half a billion.
00:11:02.320 --> 00:11:03.279
Wow, fascinating.
00:11:03.360 --> 00:11:05.360
But obviously, Revolute, whole nother league.
00:11:05.440 --> 00:11:07.600
They're sponsoring Formula One teams.
00:11:08.000 --> 00:11:09.519
Yeah, Starling will never do that.
00:11:09.759 --> 00:11:10.399
It's not gonna happen.
00:11:10.639 --> 00:11:14.240
Do we do we have do we have their customer numbers available between the three?
00:11:14.399 --> 00:11:19.120
I'd love I'd love to quickly look at that because we know that Starling's customer numbers are dwindling.
00:11:19.200 --> 00:11:20.480
What's the growth look like?
00:11:20.720 --> 00:11:27.679
Because of course, that sort of spend really tells you what the bank is interested in the most in its rapid expansion.
00:11:27.840 --> 00:11:32.639
So can we we can pull it up, obviously, but live right now, Jan, do you have the numbers?
00:11:32.960 --> 00:11:42.879
Yeah, Monzo has 15.2 million customers, Starlink reports platform accounts, which is 6.2 million, I believe 3.2 million.
00:11:43.120 --> 00:11:44.480
And we'll talk about what that means in a minute.
00:11:44.720 --> 00:11:45.519
Yeah, it's a good question.
00:11:45.600 --> 00:11:46.320
What does it even mean?
00:11:46.399 --> 00:11:52.960
I was not really sure researching this, but um 3.2 million for their their B2C current account.
00:11:53.360 --> 00:11:55.919
And Revolute, what was that, Johnny?
00:11:56.080 --> 00:11:58.240
60, no, 75 million?
00:11:58.559 --> 00:11:59.679
75 million, right?
00:11:59.919 --> 00:12:01.200
Who knows what the latest number is?
00:12:01.360 --> 00:12:02.720
75, 80 million.
00:12:03.279 --> 00:12:06.399
I think they're growing by 1 million new customers every 15 days.
00:12:06.559 --> 00:12:09.200
Newspapers were reporting that, which is which is fascinating.
00:12:09.360 --> 00:12:15.200
Imagine one third of Starling being Starlink's B2C account being added to Revolute every 15 days, Johnny.
00:12:15.360 --> 00:12:16.559
Yeah, it's absolutely nuts.
00:12:16.799 --> 00:12:17.919
That's another dimension.
00:12:18.159 --> 00:12:24.720
Of course, their marketing costs a lot more, but they're also very good in doing effective marketing, one has to say.
00:12:24.960 --> 00:12:28.320
You know, whatever they're doing in terms of marketing is working incredibly well for them.
00:12:28.559 --> 00:12:30.480
Yeah, but then you could argue the same for Starling.
00:12:30.639 --> 00:12:34.399
I know they are dwindling, but 17 million pounds in marketing costs?
00:12:34.559 --> 00:12:35.039
It's not that much.
00:12:35.360 --> 00:12:36.240
It's pretty low.
00:12:36.720 --> 00:12:42.320
That feels very, very much that their growth is based around upon word of mouth.
00:12:42.480 --> 00:12:46.879
And this is the moment that I think it'd be great to hear from people that are using Starling Bank.
00:12:46.960 --> 00:12:48.159
Is it a bank that you recommend?
00:12:48.240 --> 00:12:50.720
It's certainly a bank that I would recommend for some people.
00:12:50.879 --> 00:12:55.919
So do get in the comments because I think that's a big part of their growth, is just through recommendation.
00:12:56.159 --> 00:12:58.000
It's not going to sustain their business model, though.
00:12:58.080 --> 00:13:04.320
And I think at some point they need to start to ramp up their marketing costs because referrals or word of mouth does start to plateau.
00:13:04.399 --> 00:13:06.480
It it can't sustain them forever, Jan.
00:13:06.639 --> 00:13:09.360
I don't think we'll ever see them on a Formula One car like Revolute.
00:13:09.600 --> 00:13:09.679
No.
00:13:10.080 --> 00:13:15.120
But possibly they need to start spending more money on paying people for referrals like Monzo do.
00:13:15.279 --> 00:13:17.039
They pay a big amount of that.
00:13:17.120 --> 00:13:24.000
I've been getting actually recently emails from Monzo saying, hey, we'll pay you something like£15 to£200 or something for a referral.
00:13:24.399 --> 00:13:25.039
£200?
00:13:25.840 --> 00:13:26.240
Wow.
00:13:26.559 --> 00:13:27.200
Johnny.
00:13:27.440 --> 00:13:28.320
Might have made that up.
00:13:28.399 --> 00:13:28.720
I swear.
00:13:28.879 --> 00:13:30.720
Either that or I just confuse them with Revolute.
00:13:31.039 --> 00:13:32.799
Should have referred your whole family.
00:13:33.120 --> 00:13:37.039
With a lottery scheme, you might not get the largest sum, whatever it is, I should say.
00:13:37.440 --> 00:13:38.240
You might not get it.
00:13:38.480 --> 00:13:47.440
But it's fascinating to me that Starling are spending so little, but it also tells you, if you look at where they actually spend money, and it's in human resources.
00:13:47.679 --> 00:13:48.399
It's in people.
00:13:48.559 --> 00:13:50.080
That's where they spend a lot of their money.
00:13:50.240 --> 00:13:53.600
They spend roughly 85,000 pounds per head in Starling.
00:13:53.840 --> 00:13:56.000
Monzo spend roughly 65,000 pounds.
00:13:56.080 --> 00:13:58.000
So they're really invested in their people at Starling.
00:13:58.240 --> 00:14:25.200
And I think to some degree that shows through the support that you receive, but that's still not been enough to propel their business, to propel them on to or allow them to keep up with the likes of Monzo, who, by the way, are ranked are the most recommended provider in the UK right now, according to an Ipsos poll of I think a thousand um uh users of of Monzo or of the top banks in the UK.
00:14:25.360 --> 00:14:32.240
So even though they're spending so much more money on their human resources rather than their marketing, they're still not like getting ahead.
00:14:32.480 --> 00:14:34.159
Like, what are they doing wrong?
00:14:34.480 --> 00:14:39.279
Great free account, great customer support, but can't seem to get the numbers.
00:14:39.600 --> 00:14:46.080
Do you think that engine could be could be a way to assure future growth despite interest rates falling?
00:14:46.240 --> 00:14:48.799
I think engine is a very interesting business model.
00:14:48.960 --> 00:14:52.159
It's something that where there's not a ton of competition.
00:14:52.240 --> 00:14:59.200
I know the handful of providers can think of Solaris Bank in Germany, for example, which actually I think became bankrupt recently.
00:14:59.440 --> 00:15:02.240
Could you just explain Engine for people that are listening?
00:15:02.399 --> 00:15:04.480
Because I I think it needs it needs a bit more context.
00:15:04.720 --> 00:15:15.360
It's their banking as a service product, which basically means Starling, which are really good in one thing, and that's uh showing or providing an excellent banking experience.
00:15:15.600 --> 00:15:32.799
They're taking this system that has worked so well for them and they license it to other banks, which doesn't which don't have the the infrastructure in place to offer a similar quality of service to their customers, and these banks pay them a licensing fee in order to take advantage of this this engine product.
00:15:32.960 --> 00:15:35.600
And this is something they've started in 2022.
00:15:35.840 --> 00:15:38.720
Initially, it hasn't hasn't worked as well for them, I would say.
00:15:38.879 --> 00:15:43.039
Right now, uh four years in, guess how many clients they have, Johnny?
00:15:43.440 --> 00:15:45.679
The ten four.
00:15:46.240 --> 00:15:56.720
Four, which is obviously yeah it does not sound like a lot, but it doesn't to be fair, these are all high-ticket clients, so they're they're extremely high-paying customers.
00:15:56.960 --> 00:16:02.720
Making Sarling is making a total of about 11 million pounds of these clients at the moment.
00:16:02.799 --> 00:16:12.559
Plus, they they claim they have 70 million pounds in in revenue committed, but obviously committed revenue doesn't equal actually generated revenue.
00:16:12.639 --> 00:16:16.399
You know, things can happen, commitments can can fall fail.
00:16:16.639 --> 00:16:19.120
You never know what's what's what the future provides.
00:16:19.360 --> 00:16:20.799
But it's it's kind of fascinating.
00:16:20.960 --> 00:16:24.559
An engine isn't profitable for them, unfortunately, at the moment.
00:16:24.720 --> 00:16:30.720
So they've invested 19.7 million in the past year, which is about twice what engine actually earned.
00:16:31.039 --> 00:16:33.039
But maybe that will change in the future.
00:16:33.200 --> 00:16:40.399
For sure, they're investing into it heavily and they're they're expanding, they opened new offices all over the world almost.
00:16:40.799 --> 00:16:44.720
And um, yeah, it's it's actually kind of exciting.
00:16:45.679 --> 00:16:47.360
It's exciting for Starling.
00:16:47.440 --> 00:16:49.279
I appreciate that if you're working for Engine.
00:16:49.519 --> 00:16:56.000
I'm sure that's probably why one of the reasons why they're paying on average 85,000 pounds per head for their staff is probably engineers.
00:16:56.159 --> 00:16:59.679
They probably have a lot of developers working on engine by starling.
00:16:59.919 --> 00:17:01.039
But I think it's sad.
00:17:01.200 --> 00:17:04.160
Retail customers have been somewhat forgotten.
00:17:04.480 --> 00:17:13.599
Because they need to try and plug this potential future hole when interest rates start to come down and they're earning less interest income, they'll plug that hole with engine by starling.
00:17:13.680 --> 00:17:17.039
But as a result, retail customers are getting forgotten about.
00:17:17.119 --> 00:17:24.240
They're not getting new products, useful products, or just banking products like credit cards.
00:17:24.400 --> 00:17:33.039
And Anne Bowden, the founder and CEO, or sorry, ex-CEO of Starling Bank, did actually say that they were going to launch a credit card in 2019.
00:17:33.359 --> 00:17:34.240
That's seven years ago.
00:17:34.799 --> 00:17:35.039
Wow.
00:17:35.279 --> 00:17:37.359
Yes, and they still haven't given their customers one.
00:17:37.519 --> 00:17:39.839
And I have a couple of theories why they haven't done it, Jan.
00:17:40.160 --> 00:17:41.920
One, the economics of credit cards.
00:17:42.079 --> 00:17:45.279
COVID could be one, but also the economics of credit cards in the UK.
00:17:45.440 --> 00:17:47.200
The interchange fee is capped at 0.3%.
00:17:47.920 --> 00:17:55.680
You know, the market is incredibly saturated, 0% balance transfer cards tend to dominate, rewards cards like American Express, Barclay card.
00:17:55.839 --> 00:18:00.160
They may have made the choice that they cannot simply compete at that degree.
00:18:00.319 --> 00:18:02.400
They don't want to necessarily.
00:18:02.640 --> 00:18:07.039
You should still provide a credit card for customers that just want to keep their banking in one place.
00:18:07.279 --> 00:18:10.160
Speaking of engine star, uh Jan, you like this.
00:18:10.319 --> 00:18:16.319
If you go onto the engine website and you have a look at the product catalogue, there's a credit card available there.
00:18:16.480 --> 00:18:23.200
It comes with loyalty schemes, virtual cards, things that people can plug in at their bank and launch immediately.
00:18:23.440 --> 00:18:29.519
So Starling have built a credit card, mate, but they just haven't given it to their customers here in the UK.
00:18:30.079 --> 00:18:32.319
Um, I think that's quite telling.
00:18:32.640 --> 00:18:32.799
Yeah.
00:18:33.039 --> 00:18:36.240
But what's the I mean, I I get that, Johnny, I get that.
00:18:36.319 --> 00:18:42.160
With liability-led business model, you know, trying to thrive for excellence.
00:18:42.480 --> 00:18:51.440
But like, wouldn't it be better to just just take this existing credit card product, which um if they provide it to their engine clients, I mean it already exists, right?
00:18:51.519 --> 00:18:55.440
It's it it must be somewhat good at least to take this and also offer it to their own clients.
00:18:55.519 --> 00:18:56.640
What's the strategy behind that?
00:18:56.720 --> 00:18:58.319
I just can't can't wrap my head around it.
00:18:58.559 --> 00:19:08.400
Even considering the economics in terms of the the interchange fees and it just not being that profitable, like credit cards only become profitable when you know customers carry balances.
00:19:08.640 --> 00:19:08.960
Right.
00:19:09.359 --> 00:19:11.920
And they they they pay interest.
00:19:12.160 --> 00:19:17.039
So but that is heavily scrutinized by the FCA.
00:19:17.119 --> 00:19:19.039
And this could be an issue, Jan.
00:19:19.200 --> 00:19:21.440
You know, the FCA problems that they've had.
00:19:21.599 --> 00:19:23.039
Do you want to talk talk about those?
00:19:24.000 --> 00:19:28.400
Because I think they also might explain the stagnation of Starling.
00:19:28.720 --> 00:19:30.880
They got into trouble with the FCA, Johnny.
00:19:30.960 --> 00:19:36.319
I believe it was 2021 uh when onboarding restrictions were first imposed.
00:19:36.480 --> 00:19:39.279
So far, I think they haven't been lifted yet, right?
00:19:39.359 --> 00:19:45.839
They they're still subject to certain regulations and they they have to be extremely careful with higher risk customers.
00:19:46.000 --> 00:19:55.680
Um the exact degree of the restrictions, I'm not quite sure, but um what's for sure is that this is preventing growth, you know, at least to some degree.
00:19:55.839 --> 00:20:13.119
So they're kind of tackling these these restrictions, um, trying to still grow without um yeah, without accidentally onboarding high-risk customers, which sounds easy, but I'm sure if the onboarding process is as automated as is with Starlink, it's probably not.
00:20:13.359 --> 00:20:13.599
Right?
00:20:13.759 --> 00:20:16.880
People don't necessarily disclose that they have a criminal intent.
00:20:17.200 --> 00:20:17.599
They don't.
00:20:17.680 --> 00:20:22.240
That automation, I think, is one of the reasons why they got into trouble in the first place.
00:20:22.400 --> 00:20:31.039
Um they discovered that their automated screening had been checking customers against just a fraction of the sanctioned list since 2017.
00:20:31.119 --> 00:20:37.039
So I think this came to light, like you said, in 2021, but it had been ongoing prior to that for at least four years.
00:20:37.279 --> 00:20:42.640
So in the end, I think they were fined roughly 30 million pounds, uh 29 million pounds.
00:20:42.799 --> 00:20:45.119
Um, but like Jan said, that's still ongoing.
00:20:45.200 --> 00:20:47.680
But interestingly, Monzo had a similar situation.
00:20:47.920 --> 00:20:55.200
Do you recall customers at Monzo successfully opening accounts with the address 10 Downing Street?
00:20:55.279 --> 00:20:55.759
Do you remember that?
00:20:56.160 --> 00:20:58.319
Yeah, I remember that Prime Minister's address.
00:20:58.480 --> 00:20:59.440
Oh, what's that?
00:20:59.599 --> 00:21:00.880
Um fascinating.
00:21:02.319 --> 00:21:03.359
That obviously got them in trouble.
00:21:03.519 --> 00:21:07.680
That got them into trouble with the FCA, but those sanctions were next where where do you live lifted?
00:21:07.920 --> 00:21:08.640
In the Big Ben.
00:21:12.319 --> 00:21:13.440
Monza had those sanctions.
00:21:13.599 --> 00:21:21.440
The sanctions that were uh put on Monza as a result of that were lifted, I think, last year, and they added like three million customers in no time at all.
00:21:21.599 --> 00:21:33.759
So if Starling can break break away from these problems, these sanctions that they've been under, then that might help spark growth because maybe that they they they can take more risk, onboard more customers.
00:21:34.000 --> 00:21:36.000
I mean, who's listening to this, right?
00:21:36.559 --> 00:21:39.519
That's not that's failed to get a Starling account.
00:21:39.759 --> 00:21:40.559
Are they peper?
00:21:40.880 --> 00:21:42.319
I have failed to get a Starling account.
00:21:43.200 --> 00:21:43.599
Johnny.
00:21:44.000 --> 00:21:48.160
Yes, a business account, but they all sit under the same FCA license.
00:21:48.480 --> 00:21:51.519
So it's the same regulator, whether you're B2B or B2C.
00:21:51.920 --> 00:21:55.279
I applied for a business account for Deposit Scout.
00:21:55.359 --> 00:21:57.039
That's depositscout.co.uk.
00:21:57.200 --> 00:21:58.880
That's the website that Jan and I run.
00:21:59.279 --> 00:22:02.319
Um It's a savings rates comparison website.
00:22:02.480 --> 00:22:05.039
There's nothing nefarious or illegitimate about it.
00:22:05.200 --> 00:22:10.720
Possibly my application was poor or you know they they weren't happy with something.
00:22:11.279 --> 00:22:12.960
It seems ridiculous now.
00:22:13.119 --> 00:22:15.920
But they yeah, they they didn't let me sign up.
00:22:16.160 --> 00:22:17.200
And you never get Yan.
00:22:17.680 --> 00:22:18.960
They found us to sketchy.
00:22:19.359 --> 00:22:20.480
You never talk about it.
00:22:23.680 --> 00:22:26.400
I'm not sure I would recommend Stirling anymore.
00:22:28.480 --> 00:22:33.359
But possibly this goes back to the issues that they've been facing with the FCA and growth as well.
00:22:33.519 --> 00:22:35.359
Like they're they're symbiotic.
00:22:35.440 --> 00:22:54.720
Um, they've been uh unable to grow the business because they've had to push back harder at customers who are applying, and as a result, good people, I should say good businesses like Deposit Scout, not necessarily good, but extremely law-abiding businesses are rejected as a result, or just normal good customers, law-abiding citizens who want a current account just get rejected.
00:22:54.799 --> 00:22:57.599
So jump in the comments if you've ever been rejected or declined by Starling Bank.
00:22:57.680 --> 00:22:58.720
We'd love to hear from you.
00:22:58.960 --> 00:23:01.039
But this could be causing them major problems.
00:23:01.279 --> 00:23:04.960
I I know it might be responsible for the credit card not being launched as well, Jan.
00:23:05.039 --> 00:23:13.279
I maybe they just couldn't walk into the FCA and request a new credit lending product because they were under so much scrutiny about other things.
00:23:13.440 --> 00:23:28.160
There is a lot going on at different avenues of this business, whether it's the way they set up their balance sheet, whether it's problems with the FCA, whether it's the fact that they launched this marketplace where you can get your investments, where you can get your pensions, you can get your mortgage.
00:23:28.319 --> 00:23:35.680
They've pegged their business model on that, but ultimately these are things that businesses or banks should be buying and creating in-house.
00:23:35.839 --> 00:23:40.400
I think they've made some miscalculations on along the way that have led us to this point.
00:23:40.559 --> 00:23:49.119
Because don't forget, back in 2019, I'd say Starling Bank looked like they were going to be the king of digital banking, Yan.
00:23:49.200 --> 00:23:51.440
At that point, they were smashing it.
00:23:51.599 --> 00:23:55.839
Profitable by 2021, I believe, just looking so successful.
00:23:56.160 --> 00:24:01.039
And then it just seems like there were some miscalculations and it all started to go downhill from there.
00:24:01.279 --> 00:24:02.319
Can they turn it around?
00:24:02.480 --> 00:24:03.920
What do you think the future looks like?
00:24:04.240 --> 00:24:05.200
Good question, Johnny.
00:24:05.279 --> 00:24:05.680
Good question.
00:24:05.759 --> 00:24:07.440
I'm sure they have to become innovative.
00:24:07.519 --> 00:24:14.079
They have to figure out new ways of generating income, especially with the increase interest rates dropping.
00:24:14.240 --> 00:24:18.559
And that's something that they're already, you know, struggling with somewhat, one could argue.
00:24:18.880 --> 00:24:29.759
Because if you look around, UK banking market, everyone is growing, Monzo is growing like crazy, they're exploding almost, revolute, whole nother dimension, as I mentioned.
00:24:30.000 --> 00:24:34.880
Um and they're shrinking, starling is shrinking, unfortunately, in terms of revenue at least.
00:24:34.960 --> 00:24:36.880
Hmm, makes you think why is that?
00:24:37.039 --> 00:24:38.160
What can they do?
00:24:38.720 --> 00:24:44.559
I would assume they most likely will launch some sort of subscription product in the future.
00:24:45.839 --> 00:24:47.279
That's my gut feeling.
00:24:47.519 --> 00:24:51.759
Obviously, I don't know for sure, but I'm I I strongly assume that, Johnny.
00:24:52.559 --> 00:24:53.279
Yeah, yeah.
00:24:53.440 --> 00:25:00.480
I mean look, if engine, if the if their bet on engine by starling doesn't succeed, doesn't pay off, I think they're gonna be in big trouble.
00:25:00.559 --> 00:25:04.720
And I think they will need other products that they can charge people for.
00:25:05.039 --> 00:25:09.680
They need they need things to to to charge for, because right now they don't really have it.
00:25:09.839 --> 00:25:11.839
We're not talking about business banking today.
00:25:11.920 --> 00:25:15.440
They do have you know business subscription products.
00:25:15.680 --> 00:25:19.359
Um but the retail arm has very little.
00:25:20.079 --> 00:25:21.119
And yeah, I think you're right.
00:25:21.200 --> 00:25:24.240
I think they need stuff to charge people for to generate more revenue.
00:25:24.400 --> 00:25:29.440
I do think it's an inevitability that Starling Bank will have some sort of insurance product in the near future.
00:25:29.599 --> 00:25:31.119
Chase just launched Chase Protect.
00:25:31.200 --> 00:25:34.319
I shouldn't say just launched, but recently launched Chase Protect.
00:25:34.640 --> 00:25:37.519
Monzo just put the price up of Monzo Max.
00:25:37.839 --> 00:25:39.039
Yeah, it's getting expensive.
00:25:39.279 --> 00:25:40.640
They need to do something like that as well.
00:25:40.799 --> 00:25:45.440
Starling Insurance, Starling something, Starling Secure, maybe it'll be called Starling Secure.
00:25:45.519 --> 00:25:48.480
I can see it now, 10 pounds, and you get a bunch of insurance bundled in.
00:25:48.640 --> 00:25:50.000
It's gonna be something like that, buddy.
00:25:50.079 --> 00:25:51.279
They're gonna have to do something like that.
00:25:51.599 --> 00:25:54.799
I mean, at some point deposits are gonna dwindle.
00:25:54.960 --> 00:25:58.480
At some point, you know, if they're not getting more customers, they're not gonna get more deposits.
00:25:58.559 --> 00:26:00.559
And people are getting more savvy with their savings.
00:26:00.640 --> 00:26:04.240
They're using websites like depositscout.com to find the better savings accounts.
00:26:04.400 --> 00:26:14.400
Like if you put Starling's cash ISO, if you put Starling's cash ISO onto the table and compare it to the others, they're they're giving, they're paying 2.5%.
00:26:15.680 --> 00:26:18.160
I mean, it's it's it's it's it's criminal almost.
00:26:18.240 --> 00:26:19.359
It's despicable.
00:26:19.519 --> 00:26:25.599
And there will be customers with money deposited into that account, and it's only a matter of time before they realize that it's not that good.
00:26:25.759 --> 00:26:27.279
I mean, that's not even inflation.
00:26:27.440 --> 00:26:28.799
Inflation's running at 2.9%.
00:26:29.119 --> 00:26:36.400
You know, and they're not going to be willing to make their savings rates more competitive because they've pegged their whole business model on how much interest they can earn from their customer deposits.
00:26:36.640 --> 00:26:39.680
They're in a very hard place right now, mate.
00:26:39.759 --> 00:26:45.200
And I think one of the ways out is through an insurance product or through some sort of subscription bundle product.
00:26:45.359 --> 00:26:49.359
Or just hoping for the best with business banking, engine by Starling.
00:26:49.599 --> 00:26:53.759
They have, you know, buy to let mortgages through uh Mortgage Fleet, I believe it's called.
00:26:54.000 --> 00:26:55.440
And get a credit card though.
00:26:55.519 --> 00:26:57.279
Please get a credit card.
00:26:57.599 --> 00:26:59.119
What does everyone think in the comments?
00:26:59.359 --> 00:27:00.720
What does everyone think of Starling?
00:27:00.799 --> 00:27:05.359
I wonder if some people out there, Jan, are just ssss happy, content with this free product that's really.
00:27:05.839 --> 00:27:06.559
I'm sure they are happy.
00:27:06.640 --> 00:27:07.359
We've seen comments.
00:27:07.440 --> 00:27:17.440
We've seen comments in the past, people mentioning how satisfied they were with Starling, how how much they appreciate the no-frills approach where there's no hidden package, no hidden upgrade.
00:27:17.519 --> 00:27:18.480
It's just seamless.
00:27:18.559 --> 00:27:21.200
It works, it's free banking, and it's great banking.
00:27:21.359 --> 00:27:22.799
And I think that has a place.
00:27:22.880 --> 00:27:26.720
It's just that, you know, it it the economy is is tough, right?
00:27:26.799 --> 00:27:28.880
Or it's getting tougher, at least for banks.
00:27:29.119 --> 00:27:34.720
And eventually you have to you have to come up with some some way to keep earning profit.
00:27:34.960 --> 00:27:36.640
I really hope the free account remains.
00:27:36.720 --> 00:27:39.440
I've read those comments as well, where people are just happy with no frills.
00:27:39.599 --> 00:27:43.279
They just want a real simple bank account with a great app as well and support that's accessible.
00:27:43.440 --> 00:27:45.759
But I'm not sure if it's sustainable for Starling Bank.
00:27:45.920 --> 00:27:46.799
Could they be bought out?
00:27:46.960 --> 00:27:51.440
Do you think there's someone out there, a bigger fish, that might try and absorb them, like a legacy bank perhaps?
00:27:51.759 --> 00:27:57.039
I think that's really realistic given their current size, because they're not too small, not too big.
00:27:57.200 --> 00:27:59.279
It's actually great size to acquire.
00:27:59.440 --> 00:28:03.759
Um yeah, it's actually interesting thought, Johnny.
00:28:04.000 --> 00:28:04.720
We will see, I guess.
00:28:04.799 --> 00:28:05.519
Time will tell.
00:28:05.680 --> 00:28:05.839
Yeah.
00:28:06.079 --> 00:28:07.920
Curious what everyone has to say about this.
00:28:08.079 --> 00:28:09.519
Please write into the comments.
00:28:09.680 --> 00:28:17.440
Join our Discord server for for actual excellent in depth discussions about banking and all kinds of other topics.
00:28:17.680 --> 00:28:21.920
We've uh I think there are very few topics that we have actually not discussed on there.
00:28:22.079 --> 00:28:27.279
Join our Discord totally free and um use depositscout.com and keep listening.
00:28:27.519 --> 00:28:27.759
Yes.
00:28:27.920 --> 00:28:28.640
Thank you, everybody.
00:00:00.160 --> 00:00:02.640
Okay, welcome back to another episode of Banking Without Borders.
00:00:02.799 --> 00:00:05.519
So three years ago, Starling Bank were beating Monzo.
00:00:05.759 --> 00:00:10.720
They had more revenue, they had more profit, and arguably they had the best free current account in Britain.
00:00:10.880 --> 00:00:17.120
There's no monthly fees, there are no pay plans, there's no upsell, and you can spend abroad with no markup.
00:00:17.199 --> 00:00:18.320
That all sounds great.
00:00:18.480 --> 00:00:20.000
Except they appear to be losing.
00:00:20.160 --> 00:00:28.399
Revenue is declining, customer numbers are stalling, and besides new AI features, important everyday banking products like credit cards are nowhere to be seen.
00:00:28.559 --> 00:00:32.799
At the same time, Monzo and Revolue are building entire ecosystems.
00:00:32.960 --> 00:00:44.000
You've got credit cards, investments, pensions, trading, crypto, eSIMs, mobile plans, and of course, paid accounts with millions of people happily handing money over every month.
00:00:44.159 --> 00:00:45.920
So what's happened to Starling Bank?
00:00:46.079 --> 00:00:53.200
Well, we've spent the last week going through their financial reports, and it turns out the answer isn't laziness or a lack of innovation.
00:00:53.280 --> 00:00:59.119
It's that Starling Bank built a business model that quietly rules out most of the products people actually want from a bank.
00:00:59.280 --> 00:01:06.159
But first, Jan, what fascinates me most is that the account is this good, yet the numbers look like a bank that's failing.
00:01:06.480 --> 00:01:07.519
Exactly right, Johnny.
00:01:07.599 --> 00:01:09.040
It's an extraordinary account.
00:01:09.200 --> 00:01:16.159
Not for the reason that it's very comprehensive, but for the for the reason that it's so um so cheap and so simple.
00:01:16.319 --> 00:01:22.079
Um it's literally free to use, there's no monthly fee, there are no tiers, it's no way to upgrade anything.
00:01:22.239 --> 00:01:23.599
It's a free account.
00:01:23.760 --> 00:01:25.760
Um, doesn't matter how much you use it.
00:01:26.000 --> 00:01:27.359
UK payments are free.
00:01:27.519 --> 00:01:30.239
You can pay abroad, of course, it for free as well.
00:01:30.480 --> 00:01:33.519
MasterCards exchange rate, there's no markup involved.
00:01:33.680 --> 00:01:36.959
You can use the ATM within the UK or abroad for free.
00:01:37.120 --> 00:01:38.719
Also, very generous limits.
00:01:38.799 --> 00:01:46.400
Um, and then overdrafts are extremely cheap as well, starting at 15% EAR, um, which is extremely good.
00:01:46.560 --> 00:01:51.120
Um, Monzo, on the other hand, I think has 19%, so it's 4% better than Monzo.
00:01:51.519 --> 00:02:00.000
Somewhat competitive savings accounts, although you could you could argue um that they're not as competitive as what's available on depositscout.com, of course.
00:02:00.159 --> 00:02:02.560
The easy saver is probably the one standing out of 4%.
00:02:02.959 --> 00:02:08.159
The app is extraordinarily simple to use while being kind of functional.
00:02:08.319 --> 00:02:14.080
So you have uh spaces, um, split payments are available, there's a builds manager.
00:02:14.240 --> 00:02:18.879
Uh also they started including AI really recently with spending intelligence.
00:02:18.960 --> 00:02:26.560
I know Johnny, you've you've criticized it in the past, you found it not as useful, but I I appreciate the fact that they're they're trying to innovate in that area.
00:02:27.280 --> 00:02:31.360
And now what really stands out is the support, I would say.
00:02:31.520 --> 00:02:32.960
It's all UK-based.
00:02:33.120 --> 00:02:40.960
I believe they're based in Cardiff in Southampton, and 24-7 accessible, which is something unheard of nowadays, right?
00:02:41.199 --> 00:02:47.439
New banks, they the the thing that they that typically sucks with them is the support, unfortunately.
00:02:47.599 --> 00:02:53.680
And that's just because support doesn't scale as well as you know everything else, because humans are involved.
00:02:53.919 --> 00:02:56.560
Yeah, and humans are expensive, very expensive.
00:02:56.800 --> 00:03:13.280
But there's a good reason why Starling Bank have been able to offer such a fantastic free account, and it's actually quite it's quite useful to know this because it does give us ideas about why certain products haven't been released and their business model is somewhat different to the likes of Revolute and Monzo.
00:03:13.759 --> 00:03:19.280
So Starling have made it their business to be very good at collecting cheap deposits.
00:03:19.520 --> 00:03:26.879
So they have around£12.7 billion in customer deposits and pay roughly 0.67% for that.
00:03:27.520 --> 00:03:29.439
So that's incredibly cheap.
00:03:30.080 --> 00:03:39.439
And what they're doing is they're taking their customer deposits, Yan, and putting them in places like the Bank of England where they can earn interest at around 3.75%.
00:03:40.240 --> 00:03:47.680
And last year, from interest income, they earned 758 million pounds or around 86% of total revenue.
00:03:48.240 --> 00:03:49.280
So this is huge.
00:03:49.759 --> 00:03:58.879
So essentially, they've got really good at paying customers very little in interest while earning a lot of interest themselves.
00:03:59.120 --> 00:04:00.639
And that's really important to know.
00:04:00.879 --> 00:04:11.360
So Starling aren't really giving you a free account, they're essentially just renting your money at about 0.67% and then putting it to work themselves at around the base rate of 3.75%.
00:04:11.759 --> 00:04:18.560
The worrying thing is, what will happen when the base rate starts to fall and that interest income starts to dwindle?
00:04:18.879 --> 00:04:19.680
That's right, Johnny.
00:04:19.759 --> 00:04:20.879
They have to become innovative.
00:04:21.040 --> 00:04:27.759
I think we we see engine um coming up, which is probably one way to tackle this, but they have to become really innovative.
00:04:27.839 --> 00:04:33.759
They have to look for other income sources, and that's something we can probably speculate about a little bit in the end as well.
00:04:33.920 --> 00:04:36.319
Where this is going, where this will be going.
00:04:36.800 --> 00:04:39.040
Will they launch pay tiers eventually?
00:04:39.199 --> 00:04:42.959
Will they have to come up with other products that earn income in some ways?
00:04:43.120 --> 00:04:58.319
I'm thinking of credit cards potentially, I'm thinking of investments within the app, pensions, some pay tiers, cashback, travel insurances, you know, making the product more versatile because those are things that are right now not available, right?
00:04:58.399 --> 00:05:00.240
Yeah, investments, huge cash cards.
00:05:00.560 --> 00:05:03.279
They've made it the brokerage businesses, right?
00:05:04.160 --> 00:05:10.399
They're offering some bolts-on products through their marketplace, which is clunky and full of friction.
00:05:10.480 --> 00:05:20.480
I mean, if you want cash back, you can link your account with the app called Verve, which is essentially just making like uh you know, you need to just have a styling account to get through the gate.
00:05:20.720 --> 00:05:22.480
I don't really know why you link your account.
00:05:22.560 --> 00:05:25.279
I don't know why you bother, but it's just retail-specific cashback.
00:05:25.360 --> 00:05:27.920
There's nothing creative or innovative or compelling about it.
00:05:28.240 --> 00:05:29.920
They don't have a loyalty point scheme.
00:05:30.079 --> 00:05:32.399
Jan mentioned the credit cards, that's not there.
00:05:32.560 --> 00:05:35.680
There are good reasons for some products being omitted, Jan.
00:05:35.839 --> 00:05:42.800
Because they are so reliant on interest income, so essentially holding what you could call liabilities on their balance sheet.
00:05:42.959 --> 00:05:50.160
So when you invest, say, a thousand pounds into your Starling account or you deposit a thousand pounds, Starling essentially owe you that money.
00:05:50.800 --> 00:05:51.920
That's a debt for them.
00:05:52.079 --> 00:05:56.000
And they've made it their business to have lots of liabilities on their balance sheet.
00:05:57.439 --> 00:06:09.600
But an investment product, like a stocks and shares ISA, is essentially just cannibalizing their business because it's encouraging their customers, Yan, to move money out of Starling and into the stock market.
00:06:10.319 --> 00:06:15.439
So they might be able to charge like a platform fee of 0.25% for that.
00:06:16.000 --> 00:06:20.000
I mean, not only that, would they have to actually invest in building the thing in the first place?
00:06:20.639 --> 00:06:24.800
But they're actually earning far more money from the interest income, like I already mentioned.
00:06:25.040 --> 00:06:25.439
Currently.
00:06:25.600 --> 00:06:26.560
Currently, good point.
00:06:26.800 --> 00:06:34.879
I think that's why they will never be able to launch their own investment product like Monzo or Revolut, because it will cannibalize their revenue.
00:06:35.040 --> 00:06:41.600
Which also, right, who's listening to this right now who would like to have or who likes to have all those things in one place?
00:06:41.759 --> 00:06:49.199
I like that with Monzo I can have my pension and my index funds in the same place as my current account and my credit card.
00:06:49.279 --> 00:06:50.959
I like having all of that there.
00:06:51.199 --> 00:06:58.399
And I think there are certain customers, Yan, that do want that, but Starling just aren't able to offer it simply because it would cost them too much money.
00:06:58.720 --> 00:07:01.360
I see this changing, Donnie, as you mentioned already.
00:07:01.600 --> 00:07:03.920
Interest rate will go down eventually.
00:07:04.079 --> 00:07:13.120
Um, it's I think it's now at 3.75% the the Bank of England's base rate, which is still somewhat high, but it will go down further.
00:07:13.279 --> 00:07:16.319
Um, that's pretty yeah, pretty sure.
00:07:16.560 --> 00:07:25.439
And um you also see it in in Starlink's revenue, the revenue they're reporting, that they're somewhat affected by by the interest rates already falling.
00:07:25.600 --> 00:07:43.120
Um, if you we can show it on the screen really quick, and everyone who's listening, in 22 they made 188 million, 23 453 million, 24, 682 million, 25, 740 million, although that was later on corrected to 940 million.
00:07:43.360 --> 00:07:55.759
Yes, and now 26, 887 million, so like six percent down compared to last year's 940 million, which is uh probably an indicator.
00:07:56.000 --> 00:07:56.800
Yeah, yeah, yeah.
00:07:56.879 --> 00:08:00.079
Well, we interest rates peaked at what 5%.
00:08:00.560 --> 00:08:05.920
I don't know the year off the top of my head, but they are starting to decline and it is impacting their revenue.
00:08:06.079 --> 00:08:13.199
And if you look at the divergence between Starling and Monzo, I don't really think we can include revolute in this because they're just racing ahead.
00:08:13.360 --> 00:08:13.600
Yeah.
00:08:13.839 --> 00:08:19.279
But in year ending 2024, Monzo started to get ahead of Starling.
00:08:19.600 --> 00:08:25.120
And to the point by last year, in terms of revenue, Monzo have double the revenue of Starling Bank.
00:08:25.199 --> 00:08:30.319
And Monzo are also making a decent amount of money, Jan, from interest income from customer deposits.
00:08:30.480 --> 00:08:34.320
But they're also making a significant amount of money through subscriptions.
00:08:34.879 --> 00:08:39.919
Something that Starling seems to be refusing to do, to have paid tiers.
00:08:40.000 --> 00:08:44.799
They've made it their thing about being kind of the everyday free bank, essentially, which is fantastic.
00:08:45.120 --> 00:08:55.919
And it's okay while interest rates are at a point where you can afford to pay for all of that, but at some point the base rate, I hope, will continue to come down.
00:08:56.159 --> 00:08:58.559
But I don't know if Starling Bank would like that.
00:08:58.879 --> 00:09:07.679
Do you like having subscriptions available to you if you would like to access them through a paid tier, or is it something that you uh typically would not take advantage of?
00:09:07.919 --> 00:09:09.759
I'm thinking about me personally.
00:09:10.000 --> 00:09:12.559
Well, I'm not quite sure to be honest.
00:09:12.639 --> 00:09:16.240
Um, I like the fact that Revolute Metal, for example, is very versatile.
00:09:16.480 --> 00:09:19.200
A lot of subscriptions included that I would use on a daily basis.
00:09:19.360 --> 00:09:25.440
Just thinking of a VPN, for example, or in the past, perplexity, which is not in there anymore, but it's another story.
00:09:25.679 --> 00:09:26.799
So I'm thinking about it.
00:09:26.879 --> 00:09:35.519
Like, is that something that customers would appreciate it, would appreciate, or is it something that you know would rather cause negative PR for Starling?
00:09:36.320 --> 00:09:37.279
What's your take on that?
00:09:37.919 --> 00:09:53.120
I I think if it helps feed the free account, keep it going, you know, keep keep Starling and as the sort of headline best travel card in the UK or one of the best, you know, keep Starling's support being uh you know so accessible.
00:09:53.279 --> 00:09:53.919
I think so.
00:09:54.080 --> 00:09:55.039
I'm happy for that.
00:09:55.120 --> 00:09:58.000
You know, that's not a story you can necessarily sell to your customers.
00:09:58.159 --> 00:10:02.480
Many people won't understand the economics behind everything, but I would be happy for that.
00:10:02.639 --> 00:10:11.440
I would even be happy to pay Starling money if it was in order to receive subscriptions, which essentially when bundled, I'd be getting for less than I'd pay if I was getting them individually.
00:10:11.600 --> 00:10:11.840
Right.
00:10:12.000 --> 00:10:12.960
That sounds fantastic.
00:10:13.039 --> 00:10:23.519
And when you think about these economics, you think about like Revolute that still don't offer a decent free account, but have a ton of subscriptions and a ton of subscription revenue.
00:10:23.679 --> 00:10:32.000
Now I don't want that for Starling, but I also don't want to see Starling's free account go away, mate, when the base rate starts to really decline.
00:10:32.320 --> 00:10:39.039
One thing I find fascinating are their marketing costs, Johnny, because it doesn't take Starlink, it doesn't cost Starling a lot to acquire customers.
00:10:39.200 --> 00:10:47.120
I think their marketing expenses are 17 or were 17.6 million pounds in the last financial year.
00:10:47.440 --> 00:10:51.759
Monzo, on the other hand, they spent 150 million pounds somewhat.
00:10:51.919 --> 00:10:54.639
Um so it's kind of and Revolute.
00:10:54.720 --> 00:10:55.519
Don't forget Revolution.
00:10:55.679 --> 00:10:56.799
Revolute half a billion.
00:10:57.039 --> 00:10:58.320
Yeah, we want to include it.
00:10:58.399 --> 00:10:58.960
Half a billion.
00:10:59.039 --> 00:11:02.240
So compare 17.6 million to half a billion.
00:11:02.320 --> 00:11:03.279
Wow, fascinating.
00:11:03.360 --> 00:11:05.360
But obviously, Revolute, whole nother league.
00:11:05.440 --> 00:11:07.600
They're sponsoring Formula One teams.
00:11:08.000 --> 00:11:09.519
Yeah, Starling will never do that.
00:11:09.759 --> 00:11:10.399
It's not gonna happen.
00:11:10.639 --> 00:11:14.240
Do we do we have do we have their customer numbers available between the three?
00:11:14.399 --> 00:11:19.120
I'd love I'd love to quickly look at that because we know that Starling's customer numbers are dwindling.
00:11:19.200 --> 00:11:20.480
What's the growth look like?
00:11:20.720 --> 00:11:27.679
Because of course, that sort of spend really tells you what the bank is interested in the most in its rapid expansion.
00:11:27.840 --> 00:11:32.639
So can we we can pull it up, obviously, but live right now, Jan, do you have the numbers?
00:11:32.960 --> 00:11:42.879
Yeah, Monzo has 15.2 million customers, Starlink reports platform accounts, which is 6.2 million, I believe 3.2 million.
00:11:43.120 --> 00:11:44.480
And we'll talk about what that means in a minute.
00:11:44.720 --> 00:11:45.519
Yeah, it's a good question.
00:11:45.600 --> 00:11:46.320
What does it even mean?
00:11:46.399 --> 00:11:52.960
I was not really sure researching this, but um 3.2 million for their their B2C current account.
00:11:53.360 --> 00:11:55.919
And Revolute, what was that, Johnny?
00:11:56.080 --> 00:11:58.240
60, no, 75 million?
00:11:58.559 --> 00:11:59.679
75 million, right?
00:11:59.919 --> 00:12:01.200
Who knows what the latest number is?
00:12:01.360 --> 00:12:02.720
75, 80 million.
00:12:03.279 --> 00:12:06.399
I think they're growing by 1 million new customers every 15 days.
00:12:06.559 --> 00:12:09.200
Newspapers were reporting that, which is which is fascinating.
00:12:09.360 --> 00:12:15.200
Imagine one third of Starling being Starlink's B2C account being added to Revolute every 15 days, Johnny.
00:12:15.360 --> 00:12:16.559
Yeah, it's absolutely nuts.
00:12:16.799 --> 00:12:17.919
That's another dimension.
00:12:18.159 --> 00:12:24.720
Of course, their marketing costs a lot more, but they're also very good in doing effective marketing, one has to say.
00:12:24.960 --> 00:12:28.320
You know, whatever they're doing in terms of marketing is working incredibly well for them.
00:12:28.559 --> 00:12:30.480
Yeah, but then you could argue the same for Starling.
00:12:30.639 --> 00:12:34.399
I know they are dwindling, but 17 million pounds in marketing costs?
00:12:34.559 --> 00:12:35.039
It's not that much.
00:12:35.360 --> 00:12:36.240
It's pretty low.
00:12:36.720 --> 00:12:42.320
That feels very, very much that their growth is based around upon word of mouth.
00:12:42.480 --> 00:12:46.879
And this is the moment that I think it'd be great to hear from people that are using Starling Bank.
00:12:46.960 --> 00:12:48.159
Is it a bank that you recommend?
00:12:48.240 --> 00:12:50.720
It's certainly a bank that I would recommend for some people.
00:12:50.879 --> 00:12:55.919
So do get in the comments because I think that's a big part of their growth, is just through recommendation.
00:12:56.159 --> 00:12:58.000
It's not going to sustain their business model, though.
00:12:58.080 --> 00:13:04.320
And I think at some point they need to start to ramp up their marketing costs because referrals or word of mouth does start to plateau.
00:13:04.399 --> 00:13:06.480
It it can't sustain them forever, Jan.
00:13:06.639 --> 00:13:09.360
I don't think we'll ever see them on a Formula One car like Revolute.
00:13:09.600 --> 00:13:09.679
No.
00:13:10.080 --> 00:13:15.120
But possibly they need to start spending more money on paying people for referrals like Monzo do.
00:13:15.279 --> 00:13:17.039
They pay a big amount of that.
00:13:17.120 --> 00:13:24.000
I've been getting actually recently emails from Monzo saying, hey, we'll pay you something like£15 to£200 or something for a referral.
00:13:24.399 --> 00:13:25.039
£200?
00:13:25.840 --> 00:13:26.240
Wow.
00:13:26.559 --> 00:13:27.200
Johnny.
00:13:27.440 --> 00:13:28.320
Might have made that up.
00:13:28.399 --> 00:13:28.720
I swear.
00:13:28.879 --> 00:13:30.720
Either that or I just confuse them with Revolute.
00:13:31.039 --> 00:13:32.799
Should have referred your whole family.
00:13:33.120 --> 00:13:37.039
With a lottery scheme, you might not get the largest sum, whatever it is, I should say.
00:13:37.440 --> 00:13:38.240
You might not get it.
00:13:38.480 --> 00:13:47.440
But it's fascinating to me that Starling are spending so little, but it also tells you, if you look at where they actually spend money, and it's in human resources.
00:13:47.679 --> 00:13:48.399
It's in people.
00:13:48.559 --> 00:13:50.080
That's where they spend a lot of their money.
00:13:50.240 --> 00:13:53.600
They spend roughly 85,000 pounds per head in Starling.
00:13:53.840 --> 00:13:56.000
Monzo spend roughly 65,000 pounds.
00:13:56.080 --> 00:13:58.000
So they're really invested in their people at Starling.
00:13:58.240 --> 00:14:25.200
And I think to some degree that shows through the support that you receive, but that's still not been enough to propel their business, to propel them on to or allow them to keep up with the likes of Monzo, who, by the way, are ranked are the most recommended provider in the UK right now, according to an Ipsos poll of I think a thousand um uh users of of Monzo or of the top banks in the UK.
00:14:25.360 --> 00:14:32.240
So even though they're spending so much more money on their human resources rather than their marketing, they're still not like getting ahead.
00:14:32.480 --> 00:14:34.159
Like, what are they doing wrong?
00:14:34.480 --> 00:14:39.279
Great free account, great customer support, but can't seem to get the numbers.
00:14:39.600 --> 00:14:46.080
Do you think that engine could be could be a way to assure future growth despite interest rates falling?
00:14:46.240 --> 00:14:48.799
I think engine is a very interesting business model.
00:14:48.960 --> 00:14:52.159
It's something that where there's not a ton of competition.
00:14:52.240 --> 00:14:59.200
I know the handful of providers can think of Solaris Bank in Germany, for example, which actually I think became bankrupt recently.
00:14:59.440 --> 00:15:02.240
Could you just explain Engine for people that are listening?
00:15:02.399 --> 00:15:04.480
Because I I think it needs it needs a bit more context.
00:15:04.720 --> 00:15:15.360
It's their banking as a service product, which basically means Starling, which are really good in one thing, and that's uh showing or providing an excellent banking experience.
00:15:15.600 --> 00:15:32.799
They're taking this system that has worked so well for them and they license it to other banks, which doesn't which don't have the the infrastructure in place to offer a similar quality of service to their customers, and these banks pay them a licensing fee in order to take advantage of this this engine product.
00:15:32.960 --> 00:15:35.600
And this is something they've started in 2022.
00:15:35.840 --> 00:15:38.720
Initially, it hasn't hasn't worked as well for them, I would say.
00:15:38.879 --> 00:15:43.039
Right now, uh four years in, guess how many clients they have, Johnny?
00:15:43.440 --> 00:15:45.679
The ten four.
00:15:46.240 --> 00:15:56.720
Four, which is obviously yeah it does not sound like a lot, but it doesn't to be fair, these are all high-ticket clients, so they're they're extremely high-paying customers.
00:15:56.960 --> 00:16:02.720
Making Sarling is making a total of about 11 million pounds of these clients at the moment.
00:16:02.799 --> 00:16:12.559
Plus, they they claim they have 70 million pounds in in revenue committed, but obviously committed revenue doesn't equal actually generated revenue.
00:16:12.639 --> 00:16:16.399
You know, things can happen, commitments can can fall fail.
00:16:16.639 --> 00:16:19.120
You never know what's what's what the future provides.
00:16:19.360 --> 00:16:20.799
But it's it's kind of fascinating.
00:16:20.960 --> 00:16:24.559
An engine isn't profitable for them, unfortunately, at the moment.
00:16:24.720 --> 00:16:30.720
So they've invested 19.7 million in the past year, which is about twice what engine actually earned.
00:16:31.039 --> 00:16:33.039
But maybe that will change in the future.
00:16:33.200 --> 00:16:40.399
For sure, they're investing into it heavily and they're they're expanding, they opened new offices all over the world almost.
00:16:40.799 --> 00:16:44.720
And um, yeah, it's it's actually kind of exciting.
00:16:45.679 --> 00:16:47.360
It's exciting for Starling.
00:16:47.440 --> 00:16:49.279
I appreciate that if you're working for Engine.
00:16:49.519 --> 00:16:56.000
I'm sure that's probably why one of the reasons why they're paying on average 85,000 pounds per head for their staff is probably engineers.
00:16:56.159 --> 00:16:59.679
They probably have a lot of developers working on engine by starling.
00:16:59.919 --> 00:17:01.039
But I think it's sad.
00:17:01.200 --> 00:17:04.160
Retail customers have been somewhat forgotten.
00:17:04.480 --> 00:17:13.599
Because they need to try and plug this potential future hole when interest rates start to come down and they're earning less interest income, they'll plug that hole with engine by starling.
00:17:13.680 --> 00:17:17.039
But as a result, retail customers are getting forgotten about.
00:17:17.119 --> 00:17:24.240
They're not getting new products, useful products, or just banking products like credit cards.
00:17:24.400 --> 00:17:33.039
And Anne Bowden, the founder and CEO, or sorry, ex-CEO of Starling Bank, did actually say that they were going to launch a credit card in 2019.
00:17:33.359 --> 00:17:34.240
That's seven years ago.
00:17:34.799 --> 00:17:35.039
Wow.
00:17:35.279 --> 00:17:37.359
Yes, and they still haven't given their customers one.
00:17:37.519 --> 00:17:39.839
And I have a couple of theories why they haven't done it, Jan.
00:17:40.160 --> 00:17:41.920
One, the economics of credit cards.
00:17:42.079 --> 00:17:45.279
COVID could be one, but also the economics of credit cards in the UK.
00:17:45.440 --> 00:17:47.200
The interchange fee is capped at 0.3%.
00:17:47.920 --> 00:17:55.680
You know, the market is incredibly saturated, 0% balance transfer cards tend to dominate, rewards cards like American Express, Barclay card.
00:17:55.839 --> 00:18:00.160
They may have made the choice that they cannot simply compete at that degree.
00:18:00.319 --> 00:18:02.400
They don't want to necessarily.
00:18:02.640 --> 00:18:07.039
You should still provide a credit card for customers that just want to keep their banking in one place.
00:18:07.279 --> 00:18:10.160
Speaking of engine star, uh Jan, you like this.
00:18:10.319 --> 00:18:16.319
If you go onto the engine website and you have a look at the product catalogue, there's a credit card available there.
00:18:16.480 --> 00:18:23.200
It comes with loyalty schemes, virtual cards, things that people can plug in at their bank and launch immediately.
00:18:23.440 --> 00:18:29.519
So Starling have built a credit card, mate, but they just haven't given it to their customers here in the UK.
00:18:30.079 --> 00:18:32.319
Um, I think that's quite telling.
00:18:32.640 --> 00:18:32.799
Yeah.
00:18:33.039 --> 00:18:36.240
But what's the I mean, I I get that, Johnny, I get that.
00:18:36.319 --> 00:18:42.160
With liability-led business model, you know, trying to thrive for excellence.
00:18:42.480 --> 00:18:51.440
But like, wouldn't it be better to just just take this existing credit card product, which um if they provide it to their engine clients, I mean it already exists, right?
00:18:51.519 --> 00:18:55.440
It's it it must be somewhat good at least to take this and also offer it to their own clients.
00:18:55.519 --> 00:18:56.640
What's the strategy behind that?
00:18:56.720 --> 00:18:58.319
I just can't can't wrap my head around it.
00:18:58.559 --> 00:19:08.400
Even considering the economics in terms of the the interchange fees and it just not being that profitable, like credit cards only become profitable when you know customers carry balances.
00:19:08.640 --> 00:19:08.960
Right.
00:19:09.359 --> 00:19:11.920
And they they they pay interest.
00:19:12.160 --> 00:19:17.039
So but that is heavily scrutinized by the FCA.
00:19:17.119 --> 00:19:19.039
And this could be an issue, Jan.
00:19:19.200 --> 00:19:21.440
You know, the FCA problems that they've had.
00:19:21.599 --> 00:19:23.039
Do you want to talk talk about those?
00:19:24.000 --> 00:19:28.400
Because I think they also might explain the stagnation of Starling.
00:19:28.720 --> 00:19:30.880
They got into trouble with the FCA, Johnny.
00:19:30.960 --> 00:19:36.319
I believe it was 2021 uh when onboarding restrictions were first imposed.
00:19:36.480 --> 00:19:39.279
So far, I think they haven't been lifted yet, right?
00:19:39.359 --> 00:19:45.839
They they're still subject to certain regulations and they they have to be extremely careful with higher risk customers.
00:19:46.000 --> 00:19:55.680
Um the exact degree of the restrictions, I'm not quite sure, but um what's for sure is that this is preventing growth, you know, at least to some degree.
00:19:55.839 --> 00:20:13.119
So they're kind of tackling these these restrictions, um, trying to still grow without um yeah, without accidentally onboarding high-risk customers, which sounds easy, but I'm sure if the onboarding process is as automated as is with Starlink, it's probably not.
00:20:13.359 --> 00:20:13.599
Right?
00:20:13.759 --> 00:20:16.880
People don't necessarily disclose that they have a criminal intent.
00:20:17.200 --> 00:20:17.599
They don't.
00:20:17.680 --> 00:20:22.240
That automation, I think, is one of the reasons why they got into trouble in the first place.
00:20:22.400 --> 00:20:31.039
Um they discovered that their automated screening had been checking customers against just a fraction of the sanctioned list since 2017.
00:20:31.119 --> 00:20:37.039
So I think this came to light, like you said, in 2021, but it had been ongoing prior to that for at least four years.
00:20:37.279 --> 00:20:42.640
So in the end, I think they were fined roughly 30 million pounds, uh 29 million pounds.
00:20:42.799 --> 00:20:45.119
Um, but like Jan said, that's still ongoing.
00:20:45.200 --> 00:20:47.680
But interestingly, Monzo had a similar situation.
00:20:47.920 --> 00:20:55.200
Do you recall customers at Monzo successfully opening accounts with the address 10 Downing Street?
00:20:55.279 --> 00:20:55.759
Do you remember that?
00:20:56.160 --> 00:20:58.319
Yeah, I remember that Prime Minister's address.
00:20:58.480 --> 00:20:59.440
Oh, what's that?
00:20:59.599 --> 00:21:00.880
Um fascinating.
00:21:02.319 --> 00:21:03.359
That obviously got them in trouble.
00:21:03.519 --> 00:21:07.680
That got them into trouble with the FCA, but those sanctions were next where where do you live lifted?
00:21:07.920 --> 00:21:08.640
In the Big Ben.
00:21:12.319 --> 00:21:13.440
Monza had those sanctions.
00:21:13.599 --> 00:21:21.440
The sanctions that were uh put on Monza as a result of that were lifted, I think, last year, and they added like three million customers in no time at all.
00:21:21.599 --> 00:21:33.759
So if Starling can break break away from these problems, these sanctions that they've been under, then that might help spark growth because maybe that they they they can take more risk, onboard more customers.
00:21:34.000 --> 00:21:36.000
I mean, who's listening to this, right?
00:21:36.559 --> 00:21:39.519
That's not that's failed to get a Starling account.
00:21:39.759 --> 00:21:40.559
Are they peper?
00:21:40.880 --> 00:21:42.319
I have failed to get a Starling account.
00:21:43.200 --> 00:21:43.599
Johnny.
00:21:44.000 --> 00:21:48.160
Yes, a business account, but they all sit under the same FCA license.
00:21:48.480 --> 00:21:51.519
So it's the same regulator, whether you're B2B or B2C.
00:21:51.920 --> 00:21:55.279
I applied for a business account for Deposit Scout.
00:21:55.359 --> 00:21:57.039
That's depositscout.co.uk.
00:21:57.200 --> 00:21:58.880
That's the website that Jan and I run.
00:21:59.279 --> 00:22:02.319
Um It's a savings rates comparison website.
00:22:02.480 --> 00:22:05.039
There's nothing nefarious or illegitimate about it.
00:22:05.200 --> 00:22:10.720
Possibly my application was poor or you know they they weren't happy with something.
00:22:11.279 --> 00:22:12.960
It seems ridiculous now.
00:22:13.119 --> 00:22:15.920
But they yeah, they they didn't let me sign up.
00:22:16.160 --> 00:22:17.200
And you never get Yan.
00:22:17.680 --> 00:22:18.960
They found us to sketchy.
00:22:19.359 --> 00:22:20.480
You never talk about it.
00:22:23.680 --> 00:22:26.400
I'm not sure I would recommend Stirling anymore.
00:22:28.480 --> 00:22:33.359
But possibly this goes back to the issues that they've been facing with the FCA and growth as well.
00:22:33.519 --> 00:22:35.359
Like they're they're symbiotic.
00:22:35.440 --> 00:22:54.720
Um, they've been uh unable to grow the business because they've had to push back harder at customers who are applying, and as a result, good people, I should say good businesses like Deposit Scout, not necessarily good, but extremely law-abiding businesses are rejected as a result, or just normal good customers, law-abiding citizens who want a current account just get rejected.
00:22:54.799 --> 00:22:57.599
So jump in the comments if you've ever been rejected or declined by Starling Bank.
00:22:57.680 --> 00:22:58.720
We'd love to hear from you.
00:22:58.960 --> 00:23:01.039
But this could be causing them major problems.
00:23:01.279 --> 00:23:04.960
I I know it might be responsible for the credit card not being launched as well, Jan.
00:23:05.039 --> 00:23:13.279
I maybe they just couldn't walk into the FCA and request a new credit lending product because they were under so much scrutiny about other things.
00:23:13.440 --> 00:23:28.160
There is a lot going on at different avenues of this business, whether it's the way they set up their balance sheet, whether it's problems with the FCA, whether it's the fact that they launched this marketplace where you can get your investments, where you can get your pensions, you can get your mortgage.
00:23:28.319 --> 00:23:35.680
They've pegged their business model on that, but ultimately these are things that businesses or banks should be buying and creating in-house.
00:23:35.839 --> 00:23:40.400
I think they've made some miscalculations on along the way that have led us to this point.
00:23:40.559 --> 00:23:49.119
Because don't forget, back in 2019, I'd say Starling Bank looked like they were going to be the king of digital banking, Yan.
00:23:49.200 --> 00:23:51.440
At that point, they were smashing it.
00:23:51.599 --> 00:23:55.839
Profitable by 2021, I believe, just looking so successful.
00:23:56.160 --> 00:24:01.039
And then it just seems like there were some miscalculations and it all started to go downhill from there.
00:24:01.279 --> 00:24:02.319
Can they turn it around?
00:24:02.480 --> 00:24:03.920
What do you think the future looks like?
00:24:04.240 --> 00:24:05.200
Good question, Johnny.
00:24:05.279 --> 00:24:05.680
Good question.
00:24:05.759 --> 00:24:07.440
I'm sure they have to become innovative.
00:24:07.519 --> 00:24:14.079
They have to figure out new ways of generating income, especially with the increase interest rates dropping.
00:24:14.240 --> 00:24:18.559
And that's something that they're already, you know, struggling with somewhat, one could argue.
00:24:18.880 --> 00:24:29.759
Because if you look around, UK banking market, everyone is growing, Monzo is growing like crazy, they're exploding almost, revolute, whole nother dimension, as I mentioned.
00:24:30.000 --> 00:24:34.880
Um and they're shrinking, starling is shrinking, unfortunately, in terms of revenue at least.
00:24:34.960 --> 00:24:36.880
Hmm, makes you think why is that?
00:24:37.039 --> 00:24:38.160
What can they do?
00:24:38.720 --> 00:24:44.559
I would assume they most likely will launch some sort of subscription product in the future.
00:24:45.839 --> 00:24:47.279
That's my gut feeling.
00:24:47.519 --> 00:24:51.759
Obviously, I don't know for sure, but I'm I I strongly assume that, Johnny.
00:24:52.559 --> 00:24:53.279
Yeah, yeah.
00:24:53.440 --> 00:25:00.480
I mean look, if engine, if the if their bet on engine by starling doesn't succeed, doesn't pay off, I think they're gonna be in big trouble.
00:25:00.559 --> 00:25:04.720
And I think they will need other products that they can charge people for.
00:25:05.039 --> 00:25:09.680
They need they need things to to to charge for, because right now they don't really have it.
00:25:09.839 --> 00:25:11.839
We're not talking about business banking today.
00:25:11.920 --> 00:25:15.440
They do have you know business subscription products.
00:25:15.680 --> 00:25:19.359
Um but the retail arm has very little.
00:25:20.079 --> 00:25:21.119
And yeah, I think you're right.
00:25:21.200 --> 00:25:24.240
I think they need stuff to charge people for to generate more revenue.
00:25:24.400 --> 00:25:29.440
I do think it's an inevitability that Starling Bank will have some sort of insurance product in the near future.
00:25:29.599 --> 00:25:31.119
Chase just launched Chase Protect.
00:25:31.200 --> 00:25:34.319
I shouldn't say just launched, but recently launched Chase Protect.
00:25:34.640 --> 00:25:37.519
Monzo just put the price up of Monzo Max.
00:25:37.839 --> 00:25:39.039
Yeah, it's getting expensive.
00:25:39.279 --> 00:25:40.640
They need to do something like that as well.
00:25:40.799 --> 00:25:45.440
Starling Insurance, Starling something, Starling Secure, maybe it'll be called Starling Secure.
00:25:45.519 --> 00:25:48.480
I can see it now, 10 pounds, and you get a bunch of insurance bundled in.
00:25:48.640 --> 00:25:50.000
It's gonna be something like that, buddy.
00:25:50.079 --> 00:25:51.279
They're gonna have to do something like that.
00:25:51.599 --> 00:25:54.799
I mean, at some point deposits are gonna dwindle.
00:25:54.960 --> 00:25:58.480
At some point, you know, if they're not getting more customers, they're not gonna get more deposits.
00:25:58.559 --> 00:26:00.559
And people are getting more savvy with their savings.
00:26:00.640 --> 00:26:04.240
They're using websites like depositscout.com to find the better savings accounts.
00:26:04.400 --> 00:26:14.400
Like if you put Starling's cash ISO, if you put Starling's cash ISO onto the table and compare it to the others, they're they're giving, they're paying 2.5%.
00:26:15.680 --> 00:26:18.160
I mean, it's it's it's it's it's criminal almost.
00:26:18.240 --> 00:26:19.359
It's despicable.
00:26:19.519 --> 00:26:25.599
And there will be customers with money deposited into that account, and it's only a matter of time before they realize that it's not that good.
00:26:25.759 --> 00:26:27.279
I mean, that's not even inflation.
00:26:27.440 --> 00:26:28.799
Inflation's running at 2.9%.
00:26:29.119 --> 00:26:36.400
You know, and they're not going to be willing to make their savings rates more competitive because they've pegged their whole business model on how much interest they can earn from their customer deposits.
00:26:36.640 --> 00:26:39.680
They're in a very hard place right now, mate.
00:26:39.759 --> 00:26:45.200
And I think one of the ways out is through an insurance product or through some sort of subscription bundle product.
00:26:45.359 --> 00:26:49.359
Or just hoping for the best with business banking, engine by Starling.
00:26:49.599 --> 00:26:53.759
They have, you know, buy to let mortgages through uh Mortgage Fleet, I believe it's called.
00:26:54.000 --> 00:26:55.440
And get a credit card though.
00:26:55.519 --> 00:26:57.279
Please get a credit card.
00:26:57.599 --> 00:26:59.119
What does everyone think in the comments?
00:26:59.359 --> 00:27:00.720
What does everyone think of Starling?
00:27:00.799 --> 00:27:05.359
I wonder if some people out there, Jan, are just ssss happy, content with this free product that's really.
00:27:05.839 --> 00:27:06.559
I'm sure they are happy.
00:27:06.640 --> 00:27:07.359
We've seen comments.
00:27:07.440 --> 00:27:17.440
We've seen comments in the past, people mentioning how satisfied they were with Starling, how how much they appreciate the no-frills approach where there's no hidden package, no hidden upgrade.
00:27:17.519 --> 00:27:18.480
It's just seamless.
00:27:18.559 --> 00:27:21.200
It works, it's free banking, and it's great banking.
00:27:21.359 --> 00:27:22.799
And I think that has a place.
00:27:22.880 --> 00:27:26.720
It's just that, you know, it it the economy is is tough, right?
00:27:26.799 --> 00:27:28.880
Or it's getting tougher, at least for banks.
00:27:29.119 --> 00:27:34.720
And eventually you have to you have to come up with some some way to keep earning profit.
00:27:34.960 --> 00:27:36.640
I really hope the free account remains.
00:27:36.720 --> 00:27:39.440
I've read those comments as well, where people are just happy with no frills.
00:27:39.599 --> 00:27:43.279
They just want a real simple bank account with a great app as well and support that's accessible.
00:27:43.440 --> 00:27:45.759
But I'm not sure if it's sustainable for Starling Bank.
00:27:45.920 --> 00:27:46.799
Could they be bought out?
00:27:46.960 --> 00:27:51.440
Do you think there's someone out there, a bigger fish, that might try and absorb them, like a legacy bank perhaps?
00:27:51.759 --> 00:27:57.039
I think that's really realistic given their current size, because they're not too small, not too big.
00:27:57.200 --> 00:27:59.279
It's actually great size to acquire.
00:27:59.440 --> 00:28:03.759
Um yeah, it's actually interesting thought, Johnny.
00:28:04.000 --> 00:28:04.720
We will see, I guess.
00:28:04.799 --> 00:28:05.519
Time will tell.
00:28:05.680 --> 00:28:05.839
Yeah.
00:28:06.079 --> 00:28:07.920
Curious what everyone has to say about this.
00:28:08.079 --> 00:28:09.519
Please write into the comments.
00:28:09.680 --> 00:28:17.440
Join our Discord server for for actual excellent in depth discussions about banking and all kinds of other topics.
00:28:17.680 --> 00:28:21.920
We've uh I think there are very few topics that we have actually not discussed on there.
00:28:22.079 --> 00:28:27.279
Join our Discord totally free and um use depositscout.com and keep listening.
00:28:27.519 --> 00:28:27.759
Yes.
00:28:27.920 --> 00:28:28.640
Thank you, everybody.
