Over a decade ago, three fintechs burst onto the banking scene with ambitions to transform its very fabric: Starling, Monzo, and Revolut.
These fintech innovators rapidly scaled up as they harnessed cutting-edge technology to streamline banking operations, augment consumer experiences, and overturn established financial norms, as reported by City AM.
The trio quickly swelled their customer numbers to spectacular levels. But while two of them forged ahead on their growth trajectory, one stumbled.
This year, Revolut’s profits soared to £1bn, eclipsing the customer count of 50m, outstripping even Europe’s largest lender HSBC. On another front, industry observers are closely watching Monzo as it prepares for a highly anticipated £6bn IPO on the London Stock Exchange.
Yet amidst the success stories, Starling finds itself in dire straits; its once-promising fintech dream seeming more like a nightmare now. Its profit plunged to £223m in 2024, descending from £301m the year before, amid spiralling operating expenses which jumped to £403m from £332m, despite modest revenue gains from £682m to £714m.
Regulation frustration
Starling’s woes escalated due to regulatory entanglements. The Financial Conduct Authority (FCA) imposed a substantial £29m penalty on the firm.
The City watchdog condemned Starling’s regulatory oversight as distinctly negligent, stating its “measures to tackle financial crime did not keep pace with its growth”. According to the FCA, Starling opened over 54,000 accounts for some 49,000 “high-risk customers” during the period from September 2021 to November 2022.
Starling Bank had to earmark a £28.2 million provision in its 2025 financial statements due to a batch of pandemic-era loans that didn’t satisfy a crucial guarantee condition.
The loans in question were part of the Bounce Back Loan Scheme (BBLS), an initiative by the UK government during the COVID-19 crisis aimed at aiding small businesses with swift, low-interest funding secured by government assurances.
However, Starling decided to forfeit the government guarantee and shoulder the potential losses after discovering some loans fell short on eligibility or compliance standards.
Starling’s board chair, David Sproul, commented on the situation, noting that the bank had “resolved some important legacy matters” over the past year.
A fallen Starling
Amidst these challenges, Starling has seen its reputation come under scrutiny, particularly as it welcomed its inaugural chief marketing officer.
Michele Rousseau stepped into the role to steer the fintech’s branding and reputation management during a period marked by increasing difficulties.
Her arrival coincided with reports of significant staff turnover following CEO Raman Bhatia’s mandate for employees to return to the office ten days monthly, despite insufficient space to accommodate everyone.
Over the last year, the company’s workforce surged, with staff expenses exceeding £304 million.
Yet, this expansion contrasts with a deceleration in customer growth; account openings rose by just ten per cent to 4.6 million, a stark halving of the previous year’s expansion rate.
In 2024, Monzo’s customer numbers soared by 31 per cent to a remarkable 9.7 million, while its customer deposits ballooned by 88 per cent to £11.2 billion. Anticipation is high as the company is poised to release its latest annual report in the upcoming weeks.
Could Engine be Starling’s saving grace?
Seapoint insights founder John Cronin remarked: “Starling has no choice but to move up the risk curve – and this isn’t something we learned today or yesterday either.”
Speaking on Starling’s challenges, he said: “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?”.
It appears Starling may be banking on its competitive advantage coming through its Engine – the SaaS subsidiary of the company.
Despite Engine’s contribution to group income being a modest £8.7 million, it nevertheless represented a dramatic 284 per cent increase year-on-year.
The company appears to be going all-in on the division with ambitious plans to expand into the US market.
Raman Bhatia, chief executive, sees a “huge opportunity” in North America and is targeting revenues of £100 million in the “short to medium term.”
The stakes are high for the firm’s leadership as they make significant bets on this new venture, understanding that failure could mean losing more than just their reputation as a fintech darling.
