Starling Bank’s Julian Sawyer, chief operating officer has announced that three new clients have signed up to its banking services.
The three new sign ups are PelicanPay (of Pelican Group), which provides compliance solutions, Telleroo, bulk payment processors, and Vitesse, the international payments provider and insurance pay-out.
“These three new clients are opening up and servicing a new space for us: corporate payments, supplier payments and salary payments,” Sawyer told bobsguide ahead of the announcement.
The news comes as Starling announced it has raised £60m in a series C funding led by Merian Global Investors, as well as a further £15m from existing investors.
“Starling is one of few challengers moving into business banking with vigor,” says Michael James, head of technical architecture at Altus Consulting, reacting to the announcement.
New research released this week from Fraedom reveals that 80% of incumbent banks see challengers as a threat to their business, while 30% believe they will be the single most disruptive threat of 2019. The same report also found that 46% of respondents feel that legacy systems are the biggest barrier to growth in commercial banks.
Starling’s announcement comes at a time when rival challenger Monzo launches its own beta business accounts for small enterprises.
Increased competition and technological developments have given SMEs greater appetite for better and more bespoke service, according to an EY report published in December. The big five UK banks are now repositioning themselves by improving existing services or creating new digital banks “in the hope they can rival their new, legacy-free competition,” according to the report.
“[Starling banking services] is the hidden jewel in the crown,” says Sawyer. “We’re leveraging our investments in the payments infrastructure and providing customers with a wholly different proposition which isn’t a ‘me too’.
“What you have are two ends of the business banking payments spectrum. Monzo are doing exactly the same as what Starling is doing, we have SME accounts looking to solve banking for sole traders and micro businesses. But we can now offer the entire spectrum real-time payments including the medium and large players at the other end of the spectrum.
“The real opportunity is real-time payments. We can now offer insurers the ability to pay out instantly, rather than send a cheque in the post to replace broken locks, for example. We also offer businesses greater flexibility and control over supplier payments and salary payments in real-time,” says Sawyer.
Altus Consulting’s James warns the business banking markets can be difficult territory.
“Many micro businesses [sole traders] use the Starling current account, but I’m not sure why they’d move from that as often it’s a short term arrangement,” he says. “This low end of the business market isn’t particularly profitable. The mid to high end, which is profitable, needs an awful lot in terms of payment processing.
“If it becomes a foothold for Starling and it manages to get those extra capabilities required to service mid and high end then it could put the challenger in a really good place,” he says.