Starling Bank Business Model | How Starling Bank Makes Money?

Starling, formed in 2014, is a challenger bank. Starling’s first bank accounts were opened in 2016, with the company’s official debut (along with the Starling app) taking place in early 2017.

Starling has strived to innovate since its inception. For example, it was the first bank in the United Kingdom to integrate Apple Pay into its mobile app. 

This enables customers to access their accounts and make payments before receiving their cards via mail. Late 2017 saw the addition of Android mobile wallet capability.

Additionally, Starling was the first digital bank account to participate in the Current Account Switching Service (CASS).

Starling Bank Business Model is based on charging its user different fees for providing banking services and getting interest on cash deposited by its customers.

Accounts with Starling are managed via the app. Customers will be provided with a contactless Mastercard debit card. 

You must handle your money with a smartphone, as there is no alternative to accessing internet banking.

Users who access the banking app can take advantage of various services, including savings objectives, real-time banking notifications, and customized expenditure reports.

Starling Bank offers a comprehensive current account in the United Kingdom that can be opened and maintained immediately from the app. 

It strives to make banking more convenient and customer-centric and make your funds accessible to you regardless of where you are.

When you sign up, you’ll receive a current account, a debit card, and an app dedicated to assisting you in tracking your spending, budgeting, and saving.

What is Starling Bank?

Starling Bank is an online bank that offers various financial solutions to both private users and business owners.

Starling Bank earns money from memberships charges, interchange fees, interest and overdraft fees, referral fees, transfer fees, licensing fees from its API, and interest generated on cash.

Starling Bank Business Model

Starling Bank was founded in 2014 and has become one of the UK’s leading challenger banks. It now has over two million registered users.

Starling Bank founder Anne Boden has a strong banking background, having contributed to the design of the CHAPS real-time payment system and working for giants such as Lloyds and Allied Irish Banking.

Starling Bank takes a unique approach to traditional banking. The goal is to provide everything you need from a fully stocked UK bank account while excluding everything else. 

The bank has determined that this eliminates the need for bank branches while still providing money management tools, MasterCard contactless debit cards, and 24/7 support.

Company NameStarling Bank
Company TypePrivate
FoundersAnne Boden
ProductDigital Challenger Bank 
Founded DateJanuary 2014
HeadquarterLondon, United Kingdom

How Does Starling Bank Work?

Starling Bank is a FinTech startup that provides a range of financial solutions to individuals and businesses alike.

Starling operates in the same manner as a traditional bank. You can open a free current account that you can use for saving objectives, bill splitting, and free ATM withdrawals.

A user may create separate accounts for themselves, their life partner(s), or their children (named Kite).

You can also open a business account if you operate a business, which includes accounting, bookkeeping, and business spending insights, among other benefits.

The personal and corporate accounts come with free Mastercard debit cards that clients may use for cash withdrawals and payment of products and services.

Users of Starling can apply for loans via overdraft or directly from the company in addition to banking products.

All Starling’s accounts are covered by the Financial Services Compensation Scheme up to a maximum of £85,000 (FSCS). Users can contact the bank’s customer support department 24 hours a day, 7 days a week.

A neobank like Starling, it is accessed mostly through mobile applications (available on either Android or iOS devices). The bank’s website also allows users to access their accounts.

How Does Starling Bank Make Money?

Starling Bank earns money from memberships, interchange fees, interest and overdraft charges, referral fees, transfer fees, licensing fees from its API, and interest generated on cash.

Starling’s business approach has always served both individual consumers and a diverse range of enterprises.

This has led to its introduction of several business bank accounts, additional tools for businesses, and an API for them to utilize in their applications.

In the section below, we’ll take a closer look at each of the firm’s revenue streams.

Interchange Charges

The interchange charge on a Starling debit card is applied when a customer uses it to make a payment.

Restaurants and retail stores are responsible for interchange charges if they receive payments.

The exchange fee is approximately 1% of the purchase price. It will be split between Mastercard, the company that issued the debit card, and the employee.

Subscriptions Fees

There are various subscription fees charged by Starling Bank for the many accounts available both to individuals and to businesses.

The current personal account, the current company account, and the sole trader account are all fee-free.

Starling Bank Business Model

A second current account costs £2 per month, a Kite account is £2, and a USD business account costs $5.

The Starling business toolkit includes accounting and bookkeeping capabilities for business owners. This tool kit also requires a monthly subscription fee.

Transfer Fees

Additionally, Starling Bank charges a range of fees for money retrieval and transfer. Several examples include the following:

A 2% currency translation fee is applied when Euros are received into a British Pound account.

A 0.4 percent currency translation fee (plus local bank costs) is applied when moving British Pounds into a foreign account. £5.50 per SWIFT payment transfer.

These fees are imposed by Starling as a result of foreign deposit rules. For example, if you wish to transfer your British Pounds to a US Dollar account, a financial institution must maintain the USD equivalent in reserve. After enabling the transfer, this financial institution charges a fee.

Overdraft fees & interest

The bank assesses an overdraft fee for unresolved negative balances on personal accounts.

You will not be assessed any fees when you have a pre-arranged overdraft (i.e., you have granted Starling permission to borrow money in advance with the Bank).

Starling will assess an overdraft fee of 15% to 35% on the negative balance, depending on the customer’s credit score. Daily interest is charged on the overdraft.

Starling also earns money by collecting interest on loans it makes.

Loans are available to entrepreneurs. A monthly interest fee will then be applied based on their account amount, (projected) revenue, credit score, and loan term, among other factors.


Starling Bank’s primary objective has always been to serve consumers and businesses alike.

The company took a critical step toward that goal in October 2018. Starling introduced a Banking-as-a-Service (BaaS) offering that allows user organizations to leverage Starling’s payment technology for their clients.

Starling launched its API, through which other organizations can access and use Starling accounts and transactional information.

Starling does not provide pricing information, but it is reasonable to assume that it charges a licensing fee for access to its API (much like Plaid for its open banking API).

Its BaaS solution is currently being used by more than 300 organizations, including Square, SumUp, and CreDec.

Referral Fees

A new online marketplace was launched by Starling Bank in September 2017 for consumers and business owners.

Starling Marketplace allows Starling Account holders to connect their accounts with third-party applications. Zettle, for example, allows company owners to accept payments in-store through their accounts.

Starling Bank Business Model

Starling Bank earns revenue on the marketplace by charging referral fees. Starling receives compensation from partnered companies when users purchase services in the marketplace.

Interest On Cash

Starling uses the funds in customer accounts to lend to other institutions, like other banks, as with any traditional bank.

Afterward, these institutions pay them interest, which is often referred to as the Net Interest Margin. Statista reports that the net interest margin for all US banks was 3.35 percent in 2019.

Furthermore, Starling can now pay interest to its customers on the cash they hold in their accounts. Customers with balances less than £85,001 receive a 0.05 percent annual equivalent rate (AER).

Additional Services

Starling also provides a few extra services. In the UK, you would have to pay £5 to replace your debit card; abroad, this cost is up to £60.

As a customer, you will also be charged £20 if documentation is required to certify your account.

Features of Starling Bank

  • Freeze your card – if your card is lost or stolen, you can freeze it in-app.
  • Disable/restrict/block payments – disable chip-and-pin or contactless payments, limit online spending, and prevent certain transactions such as gambling.
  • Establish savings goals – earn interest while saving for personal expenses.
  • Money to nearby Starling customers – safely send payments to nearby Starling consumers.
  • Settle up – A’settle up’ link enables you to split payments easily.
  • Instant spending notifications – receive real-time notifications whenever you make a purchase.
  • Spending categorized – Have your transactions automatically classified
  • Statements that are no longer printed – quickly retrieve your statements within the app
  • Round up expenditures – to save money, round up transactions to the next pound.
  • Cash withdrawals abroad are free – (some cash machines charge their fee)
  • International money transfers – Additionally, the app is capable of international money transfers. Users pay a transaction cost of 0.4 percent and an additional flat rate delivery fee of £5.50 for speedier payment. This is far less expensive than many banks, which charge up to 5% for international money transactions.
  • No foreign transaction fees – spend freely abroad without incurring additional charges or a markup on the exchange rate.
  • Marketplace – link your Starling Bank account to additional financial products such as mortgages, insurance, and pensions (including ISAs).
  • Deposit cheques using your cell phone – Deposit checks up to £500 using your mobile phone.
  • Additional ‘Connected’ card – Users can order an additional card for persons they trust to make transactions on their behalf. Everything is controllable via the app.
  • Logging in via desktop – Users can log in using a laptop, a Mac, or a PC.

How much does Starling Bank cost?

There are no fees associated with a Starling Bank account, and there are no expenses associated with international travel. 

Bear in mind that you will still be charged the exchange rate for foreign withdrawals or transactions. MasterCard determines this if you pay in local currency or by the firm if you pay in sterling.

Personal users will only incur fees if they have an overdraft, an interest rate of 15%, 25%, or 35%. (dependent on your credit score). 

A daily interest charge accrues, a monthly charge is made, and this information is updated daily. Starling has confirmed that it will not charge fees or interest for unauthorized overdrafts entered inadvertently beginning April 2020.

Business customers must pay for Post Office withdrawals and deposits and a monthly charge of £2 for a Business Euro account and £5 for a Business US Dollar account if they desire to open one.

Who is the Owner of Starling Bank?

Starling Bank does not publish its ownership structure publicly as it is a privately held company.

While prior reporting has provided some insight into its present cap table, it has not revealed everything. Harald McPike, the investor, retains a significant ownership position of approximately 40%.

When Starling’s March 2021 financing round ended, he cut his shareholding from approximately 66 to 40 percent.

Trello Business Model

Anne Boden owns less than 25% of Starling Bank, which received “significant control” status from Companies House as of 2019.

Fidelity Investments, a US asset management company, Qatar Investment Authority (QIA), and Millennium Management, a global investment company, are shareholders.

Starling Bank’s ownership structure will be disclosed during the roadshow process if it decides to go public in the future.

What is the Funding and Valuation of Starling Bank?

Crunchbase reports that Starling Bank has raised $922 million in venture capital funding over ten rounds.

Goldman Sachs, Merian Global Investors, JTC Group, and the Qatar Investment Authority are notable investors.

Starling valued around $1.9 billion during its most recent investment round (Series D), announced in March 2021 (and extended in April).

What is the Revenue of Starling Bank?

Starling Bank’s fiscal year ended on March 31st, 2021, with revenues of £97.6 million. The increase in revenue over the past year was close to 600%. Losses after taxes decreased from £52.1 million to £23.3 million, down from $52.1 million a year earlier.

Success Story of Starling Bank

Starling Bank was launched in 2014 by Anne Boden, a banking executive with more than 30 years of business expertise.

Boden, a native of South Wales who grew up in a humble family, earned a bachelor’s degree in computer science and chemistry from Swansea University in 1981.

Her finance career almost began inadvertently. When Boden graduated, she intended to pursue a career in defense or intelligence, but her mother persuaded her to attend at least one banking interview.

That one interview landed her a place on Lloyds Bank’s graduate training scheme, where she stayed for three years. 

She was instrumental in developing CHAPS, the UK’s first real-time payments system, during the scheme.

Boden held numerous prominent positions with notable banks during the next few decades, including Standard Chartered, UBS, and ABN AMRO.

Boden relocated to Ireland in 2012 to take up the role of a chief operating officer of Allied Irish Banks (AIB). 

Still reeling from the financial crisis, the bank charged Boden with modernizing and fully overhauling its infrastructure.

While her time was effective in some ways, it hurt her. She witnessed firsthand how individuals were still suffering financially years after the crisis. 

Many people lost their employment and were unable to repay their mortgages or other financial obligations.

Boden opted to extend her year-long vacation (she had taken a year off before beginning at AIB) to tour the world. 

Due to her single status and lack of children, she visited a range of organizations, including Boeing Mutual, which provides financial services to employees at the company’s aircraft manufacturing in the United States.

MasterClass Business Model

She rapidly realized that she desired to establish a bank for the very individuals who had lost faith in the banking system. This occurred in early 2014.

Boden gathered a diverse group of individuals with substantial experience in the financial business to help her build the bank she envisioned. She met Tom Blomfield at a dinner in 2011, and he was one of those recruits.

He was co-founder of GoCardless, a FinTech company providing businesses with online direct debit payment capabilities. Boden even became a GoCardless advisor.

He rejoined a dating business in New York in 2013 after leaving GoCardless. After returning to the United Kingdom in 2014, he established Starling Bank and served as its Chief Technology Officer (CTO).

Regrettably, their relationship was defined by regular clashes and disagreements over how Starling Bank should be constructed. 

The turning point occurred in January 2015, when Boden was denied an investment opportunity after discovering that the co-founder of the prospective company had committed a major felony.

Blomfield resigned a few days later as a result. To compound matters, he staged a walkout and urged other co-founders and software developers to follow suit. 

Blomfield and the remaining staff founded Monzo, which quickly became one of Starling’s biggest competitors.

Meanwhile, Boden found herself suddenly without co-founders and rapidly running out of money. To begin, she recruited a new group of employees. 

After months of rejections, Harald McPike, a Bahamas-based investor, summoned her to his house to propose the Starling concept.

He peppered her with varied inquiries for three days in a row. Boden had secured a £48 million investment from McPike at the end of the trip. 

This, however, came at a significant cost to Boden. McPike obtained majority ownership (about 66 percent) in the company through the transaction.

Nonetheless, the financing enabled Starling to meet the capital criteria necessary to obtain a banking license, which is obtained in June 2016. 

The banking license would enable the organization to offer a range of financial services, including loan issuance.

However, Starling’s initial strategy focused on a single product and delivered a superior experience to conventional banks. That offering evolved into its present account, which it beta-tested in March 2017.

Additionally, the company disclosed plans to offer a third-party marketplace someday. Other financial service providers, such as TransferWise, would sell their products to users of Starling. In September 2017, the marketplace started a few months later.

Starling grew its markets over the next few years, raising further funds and expanding its product portfolio. 

For example, in March 2018, it established bank accounts for small and medium-sized businesses (SMEs).

A year later, in February 2019, Starling came under fire following its receipt of a £100 million grant from the Banking Competition Remedies board. 

Aidene Walsh, one of the board’s members, had worked for Boden numerous times over the previous 15 years and served as an advisor to Starling.

Compared to Monzo and Revolut, who invested millions in advertising, Starling chose to remain mostly invisible. 

For example, Starling debuted its first television commercial in October 2019.

However, Starling’s prudent budgeting enabled it to fare far better during the coronavirus outbreak. 

While Monzo and Revolut were forced to lay off a considerable number of people, Starling did not.

Southwest Airlines Business Model

Starling Bank will be the first profitable challenger bank in the United Kingdom by the end of 2020. It achieved break-even status for the first time in October 2020.

Starling also made its first acquisition thanks to sustained capital infusions and profitability far into 2021. In July 2021, it acquired Fleet Mortgages of the United States for around $69 million.

Today, Starling Bank has over two million current accounts and close to £6 billion in customer deposits. Additionally, the organization now employs over 1,000 individuals.