January 13, 2021

Starling Bank wants to buy a lender

Speaking exclusively to Sifted, Starling founder Anne Boden said the challenger bank is actively searching “for lending businesses to buy”.

Ryan Weeks

5 min read

Anne Boden, founder of Starling Bank

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Starling Bank, the digital bank steered by founder-turned-author Anne Boden, is hunting for acquisition targets in the lending market in a deal that could trigger a neobank-led wave of consolidation in the fintech sector. 

Speaking exclusively to Sifted, Boden said the company is now actively searching “for lending businesses to buy”, with Europe’s non-bank lenders (including P2P firms) squarely in its sights. 


A deal makes sense for Starling because the bank, more so than any other fintech business, has capitalised on the emergency lending schemes designed by the UK government to prop up struggling businesses during the pandemic’s early lockdowns.

Between October 2019 and October 2020, the startup’s gross lending ballooned from £37m to £1.5bn — driven primarily by its work dishing out 100% taxpayer-guaranteed Bounce Back Loans to small businesses.

A decent portion of that money has been distributed through partnerships with P2P lenders like Funding Circle and Zopa, and executives at Starling have already admitted to having looked at acquisition opportunities.

But Boden, in an interview with Sifted, went a step further. She said the company is now actively searching for a lending business to acquire. 

“Because we have a European strategy, we’re also keen on looking for lending businesses to buy,” she said.  

Asked again to clarify if that means that Starling is actively on the lookout for a lender to buy, she said: “Yes”.

Boden explained Starling would continue to dish out loans under the government’s emergency funding schemes, but added that “there are other sorts of lending that we’re currently working on to replace that”.

Part of the rationale is that while emergency lending has been a boon to the business, helping it to break even in the month of October, Boden acknowledges that — even with the UK once again locked down — the schemes will not last forever.

That means Starling has to look for other ways to sustain its beefed-up lending operations.

Boden also provided a potential clue as to which pools Starling is fishing in for acquisitions by pointing out that the retail investors who have historically powered P2P platforms have for the most part been replaced by institutional funding, which are costly when compared with the retail deposits.

The union of Starling, which has a pile of cheap cash in the form of retail deposits, and a lender with solid distribution, could be a lucrative one. 


 Boden added that P2P lenders and non-banks are under pressure at the moment as the government has effectively capped the amount of interest they can charge on their loans.

“The Coronavirus Business Interruption Loan Scheme (CBILS) loans are capped at 15% [interest]. So those sorts of businesses are going to be under strain because what the government-backed lending has done is really put a ceiling on the interest rates that people can charge SMEs. And if you have a business model based on lending above this, you’re really locked out of this market,” said Boden.

There is no detail yet as to which lending business Starling might be eyeing, but there really aren’t that many sizeable non-bank lenders in Europe to choose from. The big P2P lenders in Europe include the likes of Funding Circle, which is listed on the London Stock Exchange, and October in France.

Here are a few other eye-catching quotes from our interview with the ever-energetic Boden.

On customers

  • Starling customers have been relatively unaffected by the lockdown: “Our demographic is less likely to have been impacted by the lockdown [than other fintechs]. Our demographic is slightly older, slightly more affluent. So [our users are] more likely to have just gone home to work and are continuing to spend on the family shop and going to Sainsbury’s and Tesco’s and whatever.”
  • They were never big on using the bank for travel: “We’re less impacted by [the big dip in] international travel. We’ve got only something like 15% of our transactions that were international travel, and therefore interchange wasn’t really impacted.”
  • Forget Freetrade, Starling customers invest old school: “One of our most popular merchants is Hargreaves Lansdown. Starling customers tend to be investors.”

On open banking

  • Acquisitions in this space are a risk: “Visa buying Plaid and Mastercard buying Vocalink is all a way of maintaining what is basically a duopoly.”
  • So much for a third card scheme: “Especially in Europe, there’s been a lot of push for a third card scheme or some alternative and generally the introduction of an API through an open banking mechanism could have been a third way of making those payments. And therefore it’s a very, very interesting space for the owners of the existing rails to play in.”

On crypto

  • Starling customers don’t care about crypto: “We have lots of people coming to us to ask us if we would process crypto or whatever… But the people who come forward and ask for it, in the context of having two million customers, is hardly anything. People do ask for it, but we don’t think it’s going to be what our customers really need.”


This article first appeared in the beta version of our new fintech newsletter. If you want to sign up to the 'early adopter' list and check it out, please sign up here