Starling Bank seeks £35m in new competition funding: ‘We’re a safe pair of hands’
Starling Bank is applying for grants worth up to £35m ($44m) from an EU-backed competition fund that has already awarded it £100m.
The startup bank is applying for two grants from a new pool of funding offered by the Banking Competition Remedies (BCR), chief executive Anne Boden told Yahoo Finance UK. Starling is applying for grants worth £35m and £25m to build new products for small and medium-sized businesses.
“We are doing well and therefore we believe it’s in the interest of competition in the UK for us to be given an additional grant of £35m in order for us to be competitive in new sectors of SMEs,” Boden said.
BCR runs a £775m ‘alternative remedies’ fund set up by Royal Bank of Scotland to encourage competition in the UK banking market. The fund was created to satisfy EU state aid rules, following the bailout of RBS by the UK government in 2008.
Starling was awarded £100m from the fund last year to develop new products for the SME market. The startup will spend the money over four years and has already used some of it to build out its marketplace and develop services such as cheque imaging.
“We’re very pleased with what we’ve done,” Boden said. “We’ve managed to build a very successful, high-growth SME business, we now have something like 3% of market share and we’re a safe pair of hands to be honest.
“We have over delivered on everything that we’ve promised and we feel as if that next stage for us now is to put ourselves under the next level of scrutiny.”
If Starling is successful, it plans to use the money to build tech for more difficult to reach parts of the small business market, such as non-profits and companies with complex ownership structures.
The additional funding has come up for award after two banks initially awarded cash from the fund, Metro Bank and Nationwide, handed back £100m between them. Nationwide blamed COVID-19 for throwing its plans off track, while Metro Bank struggling with an accounting scandal that has battered its share price.
“If you think, money has been given back by organisations that felt they couldn’t deliver,” Boden said. “If you look at all the commitments, Starling has delivered everything it’s promised and therefore we’re a safe bet for the next award of money.
“Starling is very, very good at execution. We’re very, very good at doing difficult things.”
Applications for the grants were opened a fortnight ago and an announcement is expected in September. Other fintechs applying for grants include Tide and Clearbank, Trade Ledger and Equifax, and Funding Xchange.
Starling Bank was founded by Boden in 2014 as a digital-only bank and today has over 1.4 million customers, including 180,000 small business customers. The startup has raised more than £360m in equity funding to date.