Starling takes the challenger fight to big banks with European and wholesale push

Starling chief executive Anne Boden
Starling chief executive Anne Boden

Digital challenger bank Starling has taken its battle with the big lenders on to new turf after winning a big Government contract and pushing into wholesale banking in mainland Europe.

Starling - which only officially launched in April this year - has won a payment services deal with the Department for Work & Pensions to help verify benefit claimants for universal credit.

Under the contract Starling will oversee a system for making initial small payments as a means of identity verification.

Starling has also been accepted into the EU’s payment system for large euro transactions, allowing it to process faster payments for major companies and big banks.

It is the first UK challenger bank to be accepted into the system, called Target2, helping it speed up its planned expansion into the rest of Europe, starting with Ireland.

Euro 
Starling is now able to handle big euro transactions for companies and lenders Credit: REUTERS/Kai Pfaffenbach

Anne Boden, founder and chief executive of Starling and a former AIB and RBS banker, told the Telegraph the two developments showed it was “becoming a major player in both retail and wholesale banking”.

Commenting on moving into euro wholesale banking, Ms Boden said: “It’s a step change for us. A lot of the other digital challengers are small and peripheral. What we’re doing is becoming a member of the big schemes using our expertise.”

Starling is best known for its mobile banking app, which has tens of thousands of users.

It also plans to launch a business current account service early next year and will bid for a share of the £833m fund RBS is stumping up to boost competition as the price of keeping business lending subsidiary Williams & Glyn.

Starling’s growth has lagged behind rival digital challenger Monzo - founded by Starling’s former chief technology officer Tom Blomfield - which has amassed close to 470,000 customers.

Ms Boden said she welcomed the competition: “It’s good for an industry to have more than one player. It’s now very do-able to start a digital challenger and consumers have embraced it.”

The Sunday Telegraph revealed Monzo is planning a crowdfund of up to £30m next year ahead of a likely rapid float.

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