Students in a York University study reckon your average banker is an unsmiling, healthy-looking man. The first three pages of Google reckon a ‘fintech entrepreneur’ is a kind of ‘tech bro’ who stares blankly into a camera lens. Fortunately, they’re both wrong. Case in point, Anne Boden, a fintech and neobank founder who shows students and Google algorithms are sorely mistaken.
“I’m a woman. I’m 5ft tall. I’m Welsh. I’m middle-aged. I’m from a very ordinary background and I’m the sort of person who’ll chat to somebody in the ladies!” she tells The Guardian. Though perhaps this gives Boden an advantage. Because, while there are plenty of big achievers in banking, few can say that they’ve actually started a bank of their own, let alone turned a profit, or, according to some, turned an industry upside down.
Boden, now 63, turned her back on the corporate banking ladder 10 or so years ago to show that ‘banking types,’ and indeed banks themselves, were due an overhaul. Though even she admits that her background is unusual for someone in her position. “Fintech start-ups are all young white guys with goatees – usually with rich parents. People did think I was crazy, that no one ‘starts a bank,’ especially people who looked like me, but I’d reached the stage where I was prepared to fail. I was 54 and confident enough not to care if somebody said I was stupid.”
She’s not a college dropout, nor does she have a vast inheritance. Instead, Boden grew up in a modest family home and attended Swansea University, where she graduated in 1981 with a degree in computer science and technology. That’s where her banking journey began. Back then the likes of Lloyds Bank were swiping computer science grads like her to bolster their tech ranks. And sure enough, within three years she was working with the Bank of England on cutting-edge payment transfer technology – what we call the Clearing House Automated Payment System, or CHAPS, today. This would be her first introduction to banking, but arguably more important were her invaluable early experiences with the very clunky tech that still, in her words, plagues the banking system.
On top of all that, she was time and again confronted with unsavoury attitudes towards women in the workplace. “That environment is not used to having women,” she told the Financial Times, speaking about Lloyd’s in the 1980s. “The socialising is meant for men and not for women. When you’re in your career, you can’t say anything.”
Nonetheless, from Lloyds, Boden moved steadily up the banking ladder. First she moved to Standard Chartered Bank’s corporate banking division, and after stints at PwC, UBS, RBS and others, headed up Allied Irish Banks.
Slow to change
Throughout her career, Boden would butt up against the same issues: deep-rooted conservatism, terrible tech, and an inertia to new ideas. They were all the more worrying considering the changes we were seeing elsewhere. “Every other industry had been transformed by technology,” she says. “Amazon had changed the way we shopped, Spotify had changed the way we bought music, but no one had really changed the way we banked.” By that time e-commerce was firmly embedded within retail, while Uber and Airbnb were already well on their way to revolutionising travel and hospitality. This was 2013 after all. If the banking crisis had eroded trust in the banking system, its unwillingness to embrace new consumer behaviours – digital banking, for example – would surely inhibit its ability to bounce back.
Even today the tech at many big banks is a mess. Imagine a patchwork pattern of outdated systems affecting everything from recruitment to critical infrastructure. Not just Boden but many tech experts working parallel to banking have told of a belief among bankers that their situation is somehow different to, say, travel or hospitality. On her stint at Allied Irish Banks, Boden says: “I came to the conclusion that it was almost impossible to turn these banks into profit. Culturally, technology-wise, it was too difficult. And I started thinking about it: somebody should start a new bank. I could start a new bank. Then I started Starling.”
Starling takes flight
The challenges associated with starting a bank – however small – are huge. The regulatory hurdles are massive, as are the sums involved. What’s more, a whopping 77 percent of all current accounts in the UK are controlled by only four banks, all of which have been trading for well over 150 years. The oldest, Barclays, has been going for over three centuries. Not to be dissuaded by the above obstacles, Boden rightly trusted in her experience and instincts, returning to the UK in 2014 to secure that precious funding. That experience of peddling her vision to investors was chastening. Speaking to the Financial Times, she says, “I’d start each morning in a coffee shop sending emails, ‘I’m Anne, I’m starting a bank. Will you help me?’” By her own estimations, she amassed hundreds of rejections and racked up more than £1m in debt, mostly in legal, regulatory and branding fees. The pressure was, Boden says, “unbelievable.” Among her early team was one Tom Blomfield. Back then he occupied the Chief Technology Officer post, but would later become the founder of Monzo, another so-called neobank, last valued at £3.7bn (more on that later).
Even in the most traditional of industries, imagination, hope, determination and ambition – plus a little luck – can bring about meaningful change
They were close, but the differences between them were stark. Boden, a five-foot corporate banking veteran in her 50s. Blomfield, a bearded fintech founder in his late 20s, not long out of Oxford. Remembering an early funding pitch, Boden recalls the confusion that would meet the two of them on arrival. “We turn up for a meeting with an investor in Silicon Valley and there’s people playing ping-pong, and they look at the two of us and go: ‘What on earth’s going on here?’”
Investors were puzzled by the contrast, one part misogyny, one part ageism perhaps. But what led to their eventual separation was not anything like the above. It was a difference in opinion over an investment party whose founder had been accused of a serious crime. Details aside, the resulting disagreement pushed Blomfield and others at the fledgling company to resign. Boden’s response was to hand in a resignation of her own, which Blomfield accepted, albeit not without first insisting that she take the £1m debt with her. When she refused, he and four others left.
Boden admits that she was “shocked” at the exodus. Time heals all wounds, however, and before long a new team had formed around her. They were a mix of old acquaintances and banking veterans – not unlike her. “Quiet people. Serious people,” she says. A far cry from those she had just lost. They diligently kept at it, but her “big break” wouldn’t come until 2015, when she was invited to the Bahamas by the billionaire Harald McPike.
To her surprise, decades on from making his first fortune in blackjack, the gambler-turned-rockstar investor was intrigued by the prospect of backing a disruptor like Starling. That said, he didn’t go easy on Boden. For three days he grilled her on his luxury yacht, the New Life. It’s fair to say he was impressed. Her ambition was to walk away with £3m at a valuation of £12m. She got more than she bargained for. Because instead he offered £48m for 66 percent. It was enough to really get the ball rolling. Momentum gathered, and gathered fast. It was the tail end of 2015. And by July 2016, Starling had its banking license.
Plucky scale-up or big player?
“I knew a lot less about industry disruptors than I know now,” she told The Guardian back in 2020. “But I understood that they worked by putting power back in the hands of the consumer.” Even today, Starling is still young, though it’s no upstart and certainly no slouch. Last year it reported its first full year of profitability, launched its Software-as-a-Service subsidiary business, Engine, and announced plans to hire a further 1,000 employees in its new Manchester office.
There’s no doubt that the pandemic played a part in supercharging its growth. Because, while Covid was a major hindrance to your regular high street banks, to digital-only challengers like Starling, it inspired new and innovative products and services. The Connected Card, for example, is an additional debit card Starling customers can top up from their main account and give to a friend, family, neighbour or carer. That way they could safely hand over their card during the pandemic for them to buy whatever they needed. Real-time spending insights also helped customers manage their spending during a tricky period. And if there were any questions from customers, helplines were open 24/7.
Boden says that “we in this crisis have stood up and done our bit to keep businesses running.” A claim supported by the £1bn in loans given to small businesses throughout the pandemic. This period, it seems, inspired growth. Though don’t think for a second that this growth ended with the pandemic. Boden told staff and customers only this year that her labour of love is now a “big player” and no longer up against the “plucky scale-ups.” It has more than 3.4 million customer accounts, including 520,000 small businesses, and expects to more than quadruple its pre-tax profits in the new financial year.
“Starling was always the underdog; the diligent, hardworking, socially aware, tech-savvy fintech,” she said. “Never as cool as those businesses run by those 30-year-old tech bros. But as we have seen, markets have a nasty habit of correcting.” It’s a comment that some of her fellow neobank founders may not take to so kindly.
Boden’s pitch from the outset was to create a new type of bank. It would invest heavily in tech and steer clear of the unwieldy processes dogging its forebears. It would be online-first. Opening an account would take minutes, not weeks. Customers would know exactly where their money was going, from gym memberships to morning coffees, thanks to handy budgeting tools. All this, and more, would materialise, though Starling is not the only name to embrace a digital revolution in banking.
Monzo, Blomfield’s bank, secured its banking license within a month of Starling. Like Starling, it considers bricks and mortar banking a thing of the past. And like Starling, it remains one of the most exciting names in banking. The bank posted record revenue growth in 2022, and some believe it could follow closely behind Starling as the next European neobank to hit annual profitability for 2023. Either way, its revenues surged more than twofold last year. As for its valuation, a $500m funding round in 2021 put it at approximately £3.7bn. No slouch.
Then there’s Revolut, which posted its first ever annual profitability this March. The British-Lithuanian titan was founded in – you guessed it – 2015 by former Lehman Brothers trader Nikolay Storonsky and software developer Vlad Yatsenko. Since then it has widely come to be known as one of Europe’s hottest fintech unicorns, with a valuation of $33bn. Although some wonder whether that figure is accurate.
Sure, there are differences between these so-called neobanks, but what they share in common is an ability to quickly adapt to market demands and deliver innovative products and services to their customers, fast. Speaking to Stack, Jayakumar Venkataraman, Managing Partner at Infosys Consulting agrees that “traditional banks are saddled with legacy technology infrastructure that impacts their ability to respond quickly to market demands and deliver innovative products and services to their customers.” Unfortunately, while these banks have inspired positive changes in the banking system, some all-too-familiar barriers remain.
The rough with the smooth
“Fintech is first about finance and there are hardly any women in that,” Boden said, speaking to The Guardian. “In a boardroom of 20 people, there might be two women, often from another country. Then you’ve got technology, and there are hardly any women in tech either. Those that are tend to be in marketing roles. When you put that together with entrepreneurship, there are very, very few women fintech entrepreneurs.”
Fintech think tank Findexable recently ran a report to show that a paltry 1.5 percent of global private fintech companies are founded solely by women. Worse still, female founders enjoy just one percent of overall venture funding. “I understood how it worked, but there was nothing I could do to change me. I just had to pretend it wasn’t the case.”
“I believe that technology can change the world and make it better. And, fundamentally, I want to be part of this new brave world of technology, but I wish it wasn’t so narrow-minded.” Challenges aside, neobanks – or challenger banks – have enjoyed strong growth. They’ve seen huge investment inflows from venture capitalists. The UK in particular looks like fertile ground for these upstarts. Beyond the above three, the likes of Curve, OakNorth and Atom Bank have jointly secured around $3bn in funding. The top 10 have secured $7.9bn between them.
Increasingly, the old guard are viewing these challenger banks as less of a challenge and more an opportunity. Their issues with legacy systems are well known, and some, among them Citi, BNP Paribas and JP Morgan, have made strategic – and sizeable – investments in fintechs. “We expect this will continue, with more and more banks seeking out these future-makers,” says Venkataraman. “No one wants to get left behind and we will see more activity especially in emerging spaces like cloud-based solutions and ESG, as banks look to drive cost optimisation and push on in their own and their clients’ journeys toward net-zero.”
There are limits to this approach, however. Although the products and services offered by neobanks feel far more intuitive, the range of products is not so extensive. There is also a significant portion of the banking population for whom digital-only is a turn off. For one, almost three quarters of UK customers (74 percent) said they fully intended on returning to a physical branch post-Covid. Can Starling say that they – and a new breed of neobanks – have disrupted not just the UK banking industry but the industry at large? Opinion is split. But there’s no doubting that this is only the beginning.
What’s next?
Stepping down as CEO but remaining as a non-executive board member, Boden has spoken about the need to embrace change, “it’s why we exist, after all.” Writing in a company blog post, she says, “One thing that Starling will not change in 2023 is our commitment to innovation. While we have lofty ideas about our part in the evolution of financial services, we built Starling to deliver banking services and products that are really useful.”
That goes for everything. From Starling’s current account, which is consistently voted best in the UK, to its new virtual card, which functions like a normal debit card but instead is linked to a dedicated savings pot, Starling is giving customers what they want. Wherever you look it’s clear, Starling has big ambitions to become a world-leading technology company. “We’re profitable, very well capitalised and have no need to raise money. It’s no accident that we have never sought a silly valuation, even when the prospect of one was dangled before us,” says Boden.
Reflecting on Starling’s success, she continues, “After 10 years of optimism that innovation lies in the hands of start-ups, we may have to face up to the fact that there is a power shift to more boring corporates. I hope not. It’s up to those of us who set out to use technology to disrupt markets to keep the faith and to make sure that we continue to innovate and to delight.”
The challenger-turned-titan of banking is leaving the industry in a positive direction. Every 38 seconds, someone new opens a Starling account. It is, alongside Monzo, the bank that UK customers are most likely to recommend to a friend or family member. By her own admission, “it is proof positive that even in the most traditional of industries, imagination, hope, determination and ambition – plus a little luck – can bring about meaningful change.”
