What Starling, Allica Bank and Modularbank think about neobanking business models in 2021

Symmie Swil, head of SME banking at Starling Bank, Richard Davies, CEO of Allica Bank and Rivo Uibo, CBO of Modularbank discuss all things digital banking in 2021.

Nearly a year into the Covid-19 pandemic, and related lockdowns, we’ve seen people turn to digital banking in droves as bank branches up and down the country remain closed.

But, how have digital banks coped with this shift? And, what makes them different to incumbent financial institutions?

Speaking at the AltFi Digital Banking Forum 2021, Symmie Swil, head of SME banking at Starling Bank, said: “We’ve actually seen a big growth in our business over that period. I think a lot of businesses have been challenging the status quo in so much of what they do that it’s actually been a great opportunity for us.”

“Our focus has always been around being diversified. So having a strong customer base on both the personal and business side means that we are better positioned no matter what happens.”

Swil also revealed that Starling had grown its business customer base over the past year, starting off last year with 100,000 business account holders to now having over 300,000 SME customers.

The head of SME lending also told AltFi that the growth of their customer base could be down to people reassessing their need for a physical bank branch. She said: “I think [Covid-19] led to a reevaluation of a lot of people and a lot of businesses around, do they really need a legacy bank and their branches?”

Over the past few weeks, there have been swathes of proposed bank branch closures as consumers have shifted to online and mobile banking throughout the pandemic.

In fact, bank branch closures are becoming so widespread that the FCA has asked banks to reconsider closing branches due to the lasting impact the closures could have on vulnerable customers.

Rivo Uibo, chief business officer of Modularbank, echoed this sentiment: “If you look at consumer lenders, they want to modernise and streamline operations and if you look at any of the high street banks they are lagging behind.”

The API-driven core banking provider offers financial services modules for incumbent financial institutions, challenger banks or any business looking to embed finance into its offering, all built around Modularbank’s core banking platform.

When asked the questions of how neobanks should best tackle the problem of making money, Richard Davies, CEO of Allica Bank said: “Most new banks have gone after SME lending, but there’s a real need for banks to help SMEs coming out of Covid.”

The CEO also highlighted the need to help both those that have been deeply impacted by the Covid-19 pandemic, but also not to forget those that haven’t been.

“While the government schemes have been very necessary, they’ve mostly distracted a lot of finances away from SMEs that aren’t too impacted by Covid. I think there’s a seismic shift in the market here, where there’s real disruption to the supply dynamics that have been there before.”

It’s clear from the discussion that SME lending will remain a hot topic for quite some time, with small and medium businesses some of the hardest hit by the pandemic, it’s no wonder that digital banks are turning to lending to help lend a hand. 

Read more: AltFi Digital Banking Forum 2021: Now available on-demand!