Sustaining the current account


#1

Just seen the latest news at Monzo where losses have risen to £6.7 million. Most of this is overseas ATM costs. On a broader note, the received wisdom is that current accounts cost money to operate. This begs the question as to where revenue streams will come from.

More importantly for us folk, has there been any talk within Starling about this?


Making Money
#2

I assume, like Monzo they’ll be getting some revenue from the overdrafts they already offer plus I imagine the marketplace.

I guess 3rd parties will pay to become part of the marketplace?

Not really sure how it’ll work, I wouldn’t like the marketplace to be limited because of pricing.

Not really sure where the API falls into this either, is that spare to the marketplace?

It would be nice to understand the plan forward.


#3

Definitely an interesting one. Should this perhaps be something offered (the free foreign transactions) to customers who are actively using Starling as a bank account - e.g with some level of direct debit usage rather than just an occasional holiday spend load?


#4

I guess this kind of information is really Starling Bank’s problem. Although we might worry that they aren’t making money (because then we lose what appears to be an amazing bank!) we just have to trust that the powers that be have a plan. It’s not like banking is a new thing so I’m sure they have thought it though! :upside_down_face:


#5

Interesting and (maybe) related read: https://medium.com/@fdestin/neobank-skeptic-29fc2e053eb1

Speculation: I would guess that the marketplace like Kumnaa suggested will be the main source of revenue (look at how much thought is going into that feature). Possibly through a revenue share model. This way Starling can focus on being the best current account supplier and curate the best third parties for all the other services a traditional bank provides.

A great example I think is Transferwise, why build an international transfer service that would have to compete with a company that is optimized just for that? Why not just tap into their model and get some of the revenue.


#6

But, as you say, Gaz,…


#7

Like all banks they receive fees for processing card transactions…etc.

Everytime you make a purchase on your card the vendor pays a small percentage in processing fees.


#8

… And like all banks, Starling Bank must be generating income on capital markets, where the wealth of savers is channeled to those who can put it to long-term productive use! :slight_smile:


#9

Thanks for the insight chaps. We’re all good then :+1:


#10

This is a personal preference but I would rather pay a monthly fee to my bank to keep adverts away from me and have a bank that worked for me to manage all my finances as effectively as possible such as help me keep out of my overdraft rather than relying on me being in it to make money.


#11

A question. Not sure who can or will answer.

Based on it current form, with current accounts only, and pravtaly no charges at all, other than reasonable overdraft ones, how does Starling Bank make any money to enable it to keep trading, and also profit (since you do not go into business to lose money, or merely break even)?


#12

As far as I can tell, Starling make money in a number of different ways:

Overdrafts, I’d imagine a fair rate will still make a good profit; secondly using a small percentage of customer deposits to invest.

Starling’s Marketplace and the referral commission from the products and services available within.

Another small revenue stream is via interchange fees (a merchant charge when you use bank cards.) https://en.m.wikipedia.org/wiki/Interchange_fee and also finally by providing payment services via real time faster payments: https://www.starlingbank.com/paymentservices/