Starling Bank matures from digital upstart to mainstream lender

Starling Bank matures from digital upstart to mainstream lender

Two years ago, Starling was best known as a digital banking upstart, targeting dissatisfied retail customers of the UK’s big banks with easy-to-use current accounts, overdrafts and money transfers. Yet in the UK’s huge business lending market it barely registered, with a paltry £115,000 of loans on its books.

Then the Covid-19 pandemic hit and, amid the chaos of the sudden shift to remote working and fears of a deep recession, Starling threw open its doors to small and medium-sized enterprises (SMEs). By March this year, Starling had facilitated £2.2bn of business loans to more than 40,000 customers.

“[Starling] has had a good crisis,” says John Cronin, an analyst at stockbrokers Goodbody. “There were questions around its ability to convert deposit products into loan products, so the pandemic was a huge step forwards in that respect.”

The technological groundwork had been laid before Covid-19. In 2019, Starling was awarded a £100m grant by the UK’s Capability and Innovation Fund to build a new system that would allow it to lend to businesses. The money was part of a scheme to improve competition in the UK’s business banking market, which is dominated by incumbents such as NatWest, Barclays and Lloyds.

Starling put another £100m into developing the new technology,