“We’re a fintech start-up with a banking license rather than a bank that does tech.”
Insightive.tv: What do you think of today’s digital banking?
Julian: I think that if you look at the current banking apps that are out there, they are all 5 out of 10, 4 out of 10, with a couple that are probably 6 out of ten, nonetheless they are all poor. I think customers don’t understand why they can’t set up a new payee on their phone. They look at it and go — Why does my network provider know that I am in Spain, but my bank still doesn’t and is, therefore, blocking my card? Why am I getting fees when you know in advance what I am doing?
I think what you have got is banks that have digitised, without developing digital banking. The key difference is that what they have done is simply put a website onto a smaller screen and put it onto an app — this is inherently weak. If you just start on a phone, and you don’t have a website, branch network or contact centre, then you can optimise that one channel and make it amazing.
A lot of people have made assumptions about what we are doing and how we are doing it. I think we have a fresh platform that is different to other challenger banks – and a focus that is also unique. We’re building the current account of the future, one that will make the traditional current account obsolete. That specificity and focus is key.
Insightive.tv: How is your contracting process going to work?
Julian: Our process will be all electronic. We are a mobile only current account, and one of the next generation of banks. Our target customers are those who are living their life on a mobile phone.
The expectation is that I can sign up to a website now and I can stream a movie in under five minutes — so why can’t I open a bank account in that time frame as well?
In terms of applying, in terms of identification, verification and anti-money laundering compliance — everything is electronic. Accessing Ts and Cs, and signing the contracts, is a very simple and straightforward electronic process.
Julian was clear that the entire bank’s focus would be digital —
Julian: We are a very much integrated team without silos, so something like contracting, which cuts across a whole range of functions, is being managed as a single joint initiative rather than one department doing it at the cost of everything else. At different stages, we bring in our legal team and marketing team, but the whole thing is driven by the product.
Insightive.tv: Are you using third party contractors to build and maintain your system?
Julian: We are going to use as few intermediaries as possible. We own the process, along with all of our staff. Our contact centre sits in our head office. So, again, it’s a different mindset in how we deliver that.
We are effectively building the technology ourselves, and we are using external providers like reference agencies to provide us with the data to enable us to make the right decision-making steps.
For Julian, the key Starling differentiator was that they are going to be self-standing —
Julian: The other bit that we have got to do is the banking basics – but brilliantly. We are the only challenger that is connected to Faster Payments, which we think is really important.
We don’t want to be sitting behind another institutional bank — that would tie us to their serviceability. For us, to be a direct member of Faster Payment, or Swift, or Master Card really is critically important. It gives us the ability to fully control how we operate as a bank.
Insightive.tv: Do you think that your digital approach affects how you view the industry?
Julian: I think the luxury that we have had is that the executives are all financial services people but we consider ourselves a technology company first. We’re a fintech start-up with a banking licence rather than a bank that does tech.
Understanding the subtlety of that statement is key. So we like technology, we like automation — we are very good at that, and we think in those ways. Yet, one of the reasons that we are not in The City is that we don’t think like that — we think like a technology start-up.
I think all that provides a completely different mindset. But, at the same time, our executive team are all ex-banking and financial services experts, so we have credibility with the regulator, and we know how to do these things.
Insightive.tv: Do you think only offering digital products will limit your customer base or service capabilities?
Julian: I think there are different types of banks. For those that engage in small-business lending, there are aspects that are hard or impossible to automate. The risks in business lending are also entirely different to those in retail banking.
The key thing to recognise for us is that the current account is different than most other financial service products. It’s in the non-advice space. A mortgage, on the other hand, I would say that you need some dialogue to understand what it is. Our account is one where you pay your money in, you have your debit card — or mobile pay — you use it, and you spend your money. So it is probably the only FS product that is absolutely destined for a mobile device because you transact on your card and on payments and direct debits every day, several times a day. You don’t do that with your loan or mortgage, your pension, ISAs or anything else.
So you have a device that is with you every minute and you make everyday transactions. And then you have a product that you are using the whole time, and that you want insight and knowledge about on a regular basis. You put those two things together and that is the perfect product for that channel. No other financial services product has that relationship.
Insightive.tv: What are the biggest barriers you have faced?
Julian: Not sure you’d call these barriers but there are some significant milestones that need to be achieved. Some taking months or even years.
For one, we had to get a banking licence — which we have now done. Until you have got that, people don’t take you seriously throughout the procurement and selection process. You have got to have an investor — which we have also now done. Again, if you don’t have money you can’t pay people or contract with suppliers.
The next challenge is to get customers. So the thing we now have to do is market to people, get people interested and excited about the idea that there are different bank accounts out there. That some are different, and some are better.
Insightive.tv: How digital do you think banking will become, and where do you see Starling in the future?
Julian: I don’t think we draw the line. We are genuinely curious about where technology will go.
This is about saying — how do we use technology to help customers? We think that your data is your data and we should, therefore, be using it to the benefit of you, like telling you when you will be overdrawn — not for the benefit of us so that we can get a fee out of you. We think that with Apple Pay, or Android Pay, we are giving customers a choice of actually having or not having a physical piece of plastic. You will be able to get money out of an ATM if you want to. As new digital services come into play, we will be at the forefront of that. This is what it means to do banking basics brilliantly. By us being connected into the banking system, this means that we can participate, lead, drive, launch and give to our customers the best possible service. As payment schemes change, we aren’t going to wait for one of the other Big Banks to give that service to us.
Where most banking apps are updated every six months, we will be thinking about change on a daily or weekly basis. So I think it is about where we position ourselves, and about a culture of evolution.
We think money is serious. Your money is serious. We think it’s important not to be too flippant, not to be too casual. We are not going to be an angry challenger. We don’t think that’s right for your money. If it is where your salary is, where you’re saving — then we think you ought to have some confidence in that service.
It is going to sound rather blase here — but building the bank and delivering the bank is not something that overly worries me. We know how to do this. We have a different mindset in how we approach things, and this drives us to innovation.
We sat down with Chief Operating Officer at Starling, Julian Sawyer, to discuss how digital contracts have played into the business model he thinks can revolutionise banking, and open up a market long held by a cloistered group of ageing giants.
Starling Bank won a banking license this summer and plans on opening for business in January 2017. But they have already made waves as one of several all-digital Challenger Banks utilising new technology to break into several financial service markets.
THE DIGITAL FUTURE OF CUSTOMER CONTRACTING series