Goldman Sachs invests $69 million in British digital bank Starling

Anne Boden, CEO of Starling Bank, speaks at the Web Summit 2019 in Lisbon, Portugal.

Harry Murphy | Sports file for Web Summit via Getty Images

LONDON – UK digital bank Starling has raised £ 50 million (US $ 69 million) in funding from Goldman Sachs.

The fresh money comes on top of a £ 272 million investment round announced by Starling last month that was worth £ 1.1 billion to the online lender. The deal with Goldman is pending regulatory approval.

“Securing the support of another global financial heavyweight shows the strength of investor demand and is another vote of confidence in Starling,” said Anne Boden, CEO and founder of Starling.

Starling is one of the UK’s largest neo banks. This term describes the wave of fintech start-ups that were founded in the last decade with the aim of taking over the established banks with no branches. It has more than £ 6 billion in deposits – down from £ 1 billion a little over a year ago.

Starling has tried to differentiate itself from competitors such as Revolut and Monzo, with an emphasis on small business banking. Of the total of 2 million users, around 350,000 are business customers. Starling says it now holds 6% of the UK’s SME banking market.

Another thing that sets Starling apart from its competitors is that it has managed to make a profit. Neobanks have been making losses for years and are now under increased pressure to prove that their companies can make money.

Goldman’s investment in the company comes after reports that JPMorgan and Barclays had shown interest in buying Starling, though Starling has denied it. Big banks are increasingly looking to partner with tech companies big and small to stay relevant at a time when smartphone banking is the order of the day.

Goldman launched its own competing digital bank called Marcus in 2018 in the UK. The bank temporarily suspended applications for its easy-to-access savings account in the UK last year as deposits rose sharply during the country’s first Covid lockdown. It has since reopened applications to UK savers.

And Goldman isn’t the only US banking giant to hit the UK market – JPMorgan is launching its own digital banking brand for UK clients.

“Starling is one of the UK’s leading and most innovative digital banks, with an ambitious technology-first leadership team and extensive market opportunity,” said James Hayward, Managing Director of Goldman Sachs. “We are very excited about your growth with this investment and believe that the company has sustainable long-term earnings potential.

Starling plans to use the fresh money to expand its services in Europe and possibly conduct a merger or acquisition. The company resumed talks to secure a banking license in Ireland last year after initially suspending it due to the coronavirus pandemic.

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