Having spent decades in charge of IT at many of the world’s largest banks, Anne Boden – CEO of startup bank, Starling – has witnessed first hand the challenge faced by the financial sector as it faces a wave of digital transformation.

Now, as the head of one of a new breed of challenger banks offering services centred around mobile devices, Boden is aiming to disrupt the industry in which she has forged her career.

Image: Starling
Image: Starling

“I think the time is now right to give consumers what they really want,” Boden said, speaking to Techworld last week.

“Amazon has changed shopping, iTunes has changed music, but nobody has changed banking. It needs people who know about banking and are passionate about technology to change it – and I am passionate about technology.”

Boden’s background in the financial sector is impressive. The computer science graduate started out at Lloyds Bank in the early eighties, before going on to senior IT roles at UBS, AON, ABN Amro and Royal Bank of Scotland, eventually taking up the chief operating officer post at Allied Irish Banks in 2011.

However, at the end of 2013 she left her COO role to create the challenger bank which is expected to launch next year, subject to regulatory approval.

“I came to the conclusion that banking is broken,” Boden says, “it is broken and it needs fixing. And the only way to fix it is to start from scratch.”

'We will be the app store for financial services'

Boden says the startup can offer an alternative to the established lenders, focusing solely on current accounts and forgoing a costly branch network. Instead it will rely solely on digital channels for customer interactions.

With smartphones becoming increasingly ubiquitous, the number of UK mobile banking users is set to almost double from 17.8 million to 32.6 million by 2020, according to recent research.

“What is different about Starling is that we only do current accounts – nothing else,” Boden says. 

"We think people will make their own minds up about where to [buy products] in future, We are going to give the best current account in the world, and when they want the best mortgage in the world we are going to offer it, but through somebody else, not us. 

"We will become the app store of financial services, providing the infrastructure, providing lots of tools around your current account.”

Harnessing transaction data

By building its technology from scratch, Boden says Starling will offer more personalised services using modern analytics techniques. This means making use of the detailed information generated with each transaction.

“When I started building systems in 1981 and 1982 we could only keep the information online for 30 days - the storage was very expensive. What if we could collate all the transaction data with all the contextual data about where the transaction was made and the circumstances? Then we could use natural language to enquire from it.

“And what if we had analytics to deduce and have insights and actions on that particular information? We are building that now.”

Boden is tight-lipped on the exact technologies the bank will use, though it involve a combination of ‘off the shelf’ software and in-house developed systems. Open source technologies such as Hadoop will form the basis of its analytics platform, and public cloud services will be considered for certain purposes.

“We will be using the cloud for some of the unstructured data,” she says. “We cannot use the cloud for banking data, because the regulator doesn’t allow you. But we can use cloud technologies for coming up with scalable solutions.”

Boden says the agility afforded by modern technology offers an advantage over the established lenders. While many banks spend vast sums on IT, much of this is on maintaining ageing systems, rather than supporting innovation.

And with a number of new banks aiming to enter the market following the relaxation of rules by UK regulators in 2013 -– such as Atom and Mondo - this has the potential to disrupt the incumbents.  

Boden believes it will difficult to for the large banks to keep pace with the pace of technological innovation.

“I think that 50 percent of the existing banks will not be around in five ten years time.  Some will reinvent themselves and some will fall by the wayside,” she says.

“Whatever happens, the bar will raise. When you get new entrants and people doing interesting things, the standard raises for everybody.”

Pace of innovation

Boden is also sceptical about the potential for established players to create their own separate banks to head off this threat, with the incorporate culture likely to stifle significant changes.

“In order to create a new startup bank you have to cannibalise your own business,” she says. “You have to be brave and admit that you can’t do it yourself. It takes quite a lot for a board to get together and decide they can’t do it [within its traditional operations], and they have to set up something separate. It is a psychological and a cultural issue.

“You then have to let it make all the mistakes of a new bank. So what would happen is that someone would say 'we don’t want you using your own HR system, we want you to use ours, we don’t want you to sue your own general ledger we want you to use ours'. Or 'we have a really good deal with Oracle, can you use Oracle rather than something open source?'

“And you can imagine what will happen. You have layer upon layer of compromise until you have an organisation that is dependent on the [parent bank].”

Investment plans

For Starling, the next are to find more funding to continue development of its services. It has already secured funding from high net worth individuals, Boden says, and is now seeking £10 million through institutional investors.

Ahead of its proposed launch, Starling aims for a further £20 million to build its capital and continue systems development.

“The investment has to go to the technology build and for regulator capital. But the vast majority of the spend is going into technology. That is good – we are a technology company with a banking licence.

See here for more information on the digital banks taking on the big financial firms. And here for Techworld's interview with Mondo bank CEO Tom Blomfield