Anne Boden, CEO of Starling Bank, speaking at the 2019 Web Summit in Lisbon, Portugal.
Harry Murphy | Sports file for Web Summit via Getty Images
LONDON – British digital bank Starling has raised £ 50 million ($ 69 million) in financing from Goldman Sachs’ growth investment arm.
The new cash adds to a £ 272m investment round, which Starling announced last month valued the online lender at £ 1.1bn. The deal with Goldman is still subject to regulatory approval.
“Securing the support of another global financial heavyweight demonstrates the solidity of investor demand and represents another vote of confidence in Starling,” said Anne Boden, CEO and founder of Starling.
Starling is one of the largest neo-banks in the UK, a term used to describe the wave of fintech companies founded in the last decade with the aim of taking on titular banks with branchless banking. It has more than £ 6bn in deposits, up from £ 1bn just over a year ago.
Starling has tried to differentiate itself from rivals like Revolut and Monzo, focusing on small business banking. Of its 2 million users in total, about 350,000 are business customers. Starling says it now has a 6% stake in the UK SME banking market.
Another thing Starling says separates him from his competitors is that he has managed to make a profit. New banks have been at a loss for years and are now under strong pressure to show that their businesses can make money.
Goldman’s investment in the company comes after it was reported that JPMorgan and Barclays had shown interest in buying Starling, although Starling has denied it. Large banks are increasingly looking for partnerships with technology companies, both large and small, to remain relevant at a time when smartphone banking is commonplace.
Goldman launched its own competing digital bank called Marcus in the UK in 2018. The bank temporarily halted applications from its easily accessible savings account in the UK last year due to an increase in deposits during the country’s initial Covid closure. It has since reopened applications to UK savers.
And Goldman isn’t the only American banking giant to enter the UK market: JPMorgan is launching its own digital banking brand for UK customers.
“Starling is one of the UK’s leading and most innovative digital banks, with an ambitious leadership team with early technology and a deep market opportunity,” said James Hayward, CEO of Goldman Sachs. “We are delighted to support your growth with this investment and believe that the company has a long – term sustainable profit potential.
Starling plans to use the new cash to expand its services in Europe and potentially make a merger or acquisition. Last year, the company resumed talks to get a banking license in Ireland after initially suspending them due to the coronavirus pandemic.