Anne Boden says Starling Bank nearing £1bn in deposits, eyes profitability in 2020

With 770,000 customers, the CEO says the break-even point is within her grasp.

While other digital banks “pursue growth and don’t care about profitability,'' Starling Bank CEO Anne Boden this morning announced she was aiming for Starling to reach break-even next year.

“We, as usual, like to do things differently - the Starling way,” Boden wrote in an open letter published this morning. 

“And what we’re doing now is expanding our product range and innovation hand in hand with growing our businesses, with a clear path to reaching profitability.”

Her announcement also included an update on some of the bank’s core metrics, including a near doubling of Starling’s customer base over the last year to reach 770,000 account holders today.

Starling is now anticipating a million customers by the end of 2019.

And these customers are depositing ever-larger quantities of cash, with the bank currently holding £600m in deposits.

At its current pace, Starling expects deposits to surpass £1bn worth of deposits by the end of the year.

By comparison, Monzo reported deposits of £461.8m in February 2019, while high street challenger Metro Bank currently holds deposits of around £13.7bn.

Read more: 5 things we learnt from Monzo’s 2019 Annual Report

Analysis

Profitability has long been a “nice to have” rather than a necessity for many venture-funded tech companies—but that tide of cheap capital won’t last forever.

Call me a naysayer, but at this late stage in the cycle I’d argue it prudent to have an eye on profitability (if not an entire plan to get there).

US venture capital as we know it emerged in the 80s, crashed in the early 90s, soared in the dot-com boom, then dried up at the turn of the millennium, boomed in the buildup to the financial crisis, then fled when the fallout came. 

A report from White Star Capital last week highlighted that the UK venture capital industry is in “rude health”, on track to nearly double last year’s $5.4bn invested in startups.

But anyone preaching “this time is different” will undoubtedly be caught out when the exodus of capital comes again.

Take a look at Maximilian Tayenthal’s seeming disregard for profit in an interview recently.

I’m certain the N26 CFO’s comments were in part bluster, the sounds of a C-suite exec swept up in their own sensationalism.

Yet Anne Boden comes at this industry from another angle, having seen a distressed and cash-strapped bank from the inside during her time at AIB.

Her caution might be mistimed—cheap capital could remain free-flowing for years to come—but her motivation is not misguided.

Profitability will become a necessity, the only question is when.

Read more: N26’s disregard for profit is digital banking’s Uber moment