Starling Bank: The rise and fall of a fintech darling
Over a decade ago three fintechs entered the banking scene and set their sights on reshaping its landscape.
Starling, Monzo and Revolut rapidly expanded as they leveraged modern tech to streamline banking operations, enhance consumer experience and disrupt traditional financial models.
The trio of fintech darlings ballooned customer bases in record numbers.
But as two continued their charge, one faltered.
Revolut topped £1bn in profit this year as its customers surpassed 50m – even beating Europe’s biggest lender HSBC.
Meanwhile, all eyes are on Monzo as the firm gears up for a blockbuster £6bn IPO on the London Stock Exchange.
But whilst its peers live the fintech dream, Starling’s fantasy has turned into a nightmare.
The neobank’s profit tumbled to £223m in 2024, down from £301 the previous year.
This came as operating costs ramped up to £403m, from £332m, helping offset modest revenue growth of £32m to £714m.
Regulation frustration
Starling’s troubles were driven by a £29m fine handed to it by the Financial Conduct Authority (FCA).
The City regulator slammed the firm’s regulatory failings as “shockingly lax” after its “measures to tackle financial crime did not keep pace with its growth”.
The fintech opened over 54,000 accounts for 49,000 “high-risk customers” between September 2021 and November 2022, according to the FCA.
Starling was also forced to set aside a £28.2m provision in its 2025 accounts after identifying a group of pandemic-era loans that failed to meet a key guarantee requirement.
These loans were issued under the Bounce Back Loan Scheme (BBLS), a UK government initiative launched during the COVID-19 pandemic to support small businesses with fast, low-interest loans backed by government guarantees.
But because some loans did not meet eligibility or compliance criteria, Starling chose to remove the government guarantee and absorb the potential losses itself.
David Sproul, chair of Starling’s board, said the firm had “resolved some important legacy matters” in the last year.
A fallen Starling
The regulatory burden is bound to weigh on Starling’s reputation and notably came as the firm enlisted its first chief marketing officer.
Michele Rousseau was tasked with handling the fintech’s brand and reputation as its turmoil deepened over the last year.
Her appointment followed reports of a staff exodus after Raman Bhatia, who took the helm in 2024, ordered staff back to the office for 10 days each month despite not having office space to hold all employees.
The business’s headcount ballooned in the last 12 months, with staff costs topping £304m.
However, this came as momentum on the customer side began to slow. The number of open accounts increased by ten per cent to 4.6m, but this was half the amount of growth made in the previous year.
Meanwhile, in 2024 Monzo’s customer base jumped 31 per cent to 9.7m and its customer deposits swelled 88 per cent to £11.2bn. The firm is expected to post its latest annual report in a matter of weeks.
Could Engine be Starling’s saving grace?
John Cronin, founder of Seapoint insights, said: “Starling has no choice but to move up the risk curve – and this isn’t something we learned today or yesterday either.”
“Its limited scale and consequent lack of operating leverage, high risk weights (standardised credit risk modelling) and relatively higher deposit funding costs mean it just cannot compete with mainstream banks. But that cuts to the heart of the business model – what competitive advantages does Starling have?”
The fintech may hope its competitive edge will come in the form of Engine – the company’s software-as-a-service (SaaS) subsidiary.
Engine’s contribution to group income was a modest £8.7m, but it marked a 284 per cent year-on-year increase.
The company looks to be throwing its full weight behind the division with plans for expansion across the US.
Raman Bhatia, chief executive, said the North American market offered a “huge opportunity” as he eyed revenues of £100m in the “short to medium term.”
It’s no surprise the firm’s boss is betting big on the new venture — because if it fails, Starling may risk losing more than just fintech darling status.