Starling has acquired 10,000 business customers and 210,000 current account customers to date, with the TSB crisis reportedly bringing in eight times the number of switches to the digital only bank.
That’s in an industry where stickiness and customer profitability is key and where it has never been easier for customers to switch banking services in the UK.
Bobsguide recently spoke with Starling chief information officer, John Mountain to ask what lessons challenger banks could learn from the tech giants in terms of customer stickiness and satisfaction and how a smooth onboarding process was a natural advantage for the technologically agile challenger banks.
“Rather than using your social media account to log into financial services it’s far more likely you’ll use your banking identity to log into other non-financial services. We have strong anti-impersonation, KYC established identities, something the tech giants can leverage.” said Mountain.
Here, Julian Sawyer, chief commercial officer, discusses the billion pound customer stickiness problem.
More and more, we’re seeing online verification as a key battleground for the challengers.
Identity as a whole topic is one of the big challenges for the next five to ten years; not only on the technological front but also on the regulations side of things. Evidently as soon as you start out in the finance industry you have a regulatory need to verify the person. But there are so many regulatory constraints that it’s very difficult for banks to do things.
Conversely, if you tried to open a savings account - which is relatively straightforward - you would have to go to a branch, you’d have to have your passport, driving licence or utility bill and queue up - most customers would simply leave it in their existing current account. Actually, digital identity and being able to transfer it, and for one organisation to rely on another without the other one being sued, that’s where the opportunity lies for consumers and providers because it has a lower barrier of entry - but the success criteria is still the same. You’ve got to be a decent person and exist as an individual but it doesn't mean you have to go and queue with your passport.
At the moment, what we have to do is scan a passport, a human or technology to verify, and we’re then taking a risk. If you can get passed that degree of uncertainty with greater collaboration, then you'll get a much more frictionless experience for onboarding and large payments.
If we can link up to the DVLA and the passport office via APIs we can gather authentic, untampered ID credentials that, combined with facial recognition and end-user selfies, we can have more accuracy that that person is who they say they are.
What are your thoughts on Monzo turning off its in-app debit top-up?
Monzo were acting as a merchant and requesting money from your debit cards in order to top up.
I think that feature actually drives the wrong behaviour that makes Monzo feel like a prepaid lifestyle card. If a bank wants to have a banking relationship with you they need to be able to offer the entire banking experience without input from other bank accounts.
There's the ‘shiny new car’ challenge; there are always people who move from Monzo to Starling or to whatever shiny new thing. We're certainly not building a banking service for those sort of users because they're not profitable.
The way to be successful is by being so much better than Barclays and the like that people will make a conscious decision to open an account with you. The secret sauce is making onboarding and the way you fund and spend money as straightforward as possible.
How do you do that?
Ultimately, there's no silver bullet in current accounts. All the challengers have nice little features to solve the problem.
Where Starling differs from Monzo is that we have a four pronged approach where they only have one to solve that problem:
- Consumer current or joint accounts
- Business and sole trader accounts: there’s a natural feeder between the two as 60% of business accounts come from your personal account.
- The Starling marketplace: we have separate for both consumer and business accounts and we can integrate other products such as insurance and loyalty; that’s a revenue stream in itself.
- The Starling payments service: this provides payments to other parties including five or six challengers as well as the Department of Work and Pensions as well as fintechs.
Effectively, you’ve got to be fantastic at technology and payments to be good at current accounts.
When you take our payments service into account, that’s when it becomes interesting because we start to make money from our competitors. So if customers don't come to us but they do go to one of our clients we make money, that is a really sticky business.
Each of the four pillars supports another and gives us flexibility. They might all be highly successful or we can focus on becoming a payments company or SME bank or sole trader. In that way, it's an interesting diversification.