Is Starling dead now?

sebtomato

adamp87 said:

Chase has a long way to go to be honest - of course it’s backed by one of the biggest banks in the world but it still has a way to go to grab a foothold in the market it’s not just Starling, Monzo , it’s competing against U.K. legacy banks 

I am sure they have a long way to go. They have apparently worked on the current version of the app and offers for the last 3 years, in secret.

Why would you think Chase is competing against legacy banks rather than new comers like Starling or Monzo? I think it's quite clear it's going after the "app only" banks.

I don't think people banking with Barclays, Natwest or other dinosaurs are going to be convinced to switched to an "app only" bank anytime soon.

sebtomato

Daliah said:

As per July 2021: Starling broke even for the month of October 2020 and has recorded a profit every month since then https://www.starlingbank.com/news/starling-bank-revenue-rises-600-percent/

You mean the page starting with "Financial year-end loss halved as revenue soars"??? Sorry, but not the best page to demonstrate they are a profitable business (unless we confuse revenue with profits).

They halved their losses so that makes them profitable?

Even if they are starting to make some profit, is that a profitable business? How much losses have they accumulated to date? 

It's like saying "I have only increased my overdraft by £1,000 this month, compared to £2,000 the previous month. I am doing well".

I think they are the perfect example of a "loss leader", gaining market shares over several years by making losses (due to technology investment and customer acquisition/marketing).

It's fine for a few years, but they are probably at a point when they have to start making money of their existing customers, and don't start losing customers or have too many dormant accounts (like mine). Or they need to shift strategy to some profitable market, like small businesses.

Having the big, hungry JP Morgan after them (which doesn't need to be profitable with Chase in the UK for a long time) must be quite scary, particularly at time when they are considering an IPO.

400ixl

sebtomato said:

400ixl said:

I don't see Chase having much of an impact on Starling at all. If that were going to be the case it would have already happened.

If Chase does not manage to grab a significant business in the next 12-24 months, then I can see them closing down the UK retail banking operation within the next 5 years. It's more make or break for Chase than Starling.

If Chase is not making much of an impact at all, why some many threads on this forum are talking about Chase rather than Starling (or others)? Clearly, there is a lot of interest (no pun intended).

 Why would it be "make or break" more for Chase than Starling? Starling is not part of a highly profitable banking group...

Surely, it's going to be more "make or break" for Starling if they don't become more profitable soon. How are they going to do that? Start charging customers for some services, while other banks are giving cashback?

Because this site is a microcosm of people looking at their financial position in detail. It's a very very small percentage of the general public. What do you think will happen on this site when the next bank has 0.25% higher rate than Chase.

You need to understand the banking industry, especially the fintech industry better, and general banking history. Starling has diversified far beyond just their own retail banking and have a banking-as-a-service and a banking-payments platform which is consumed by other financial services organisations. They make money from these other divisions doing faster payment clearances etc. Many of the payments into chase will have gone through the Starling banking platform earning them money where they were neither the holding or transfer bank.

US banks have had a habit of trying to launch in the UK, making a splash with good interest rates or other features, not getting the scale they desire and then either retreating or going into a niche such as wealth management services.

400ixl

sebtomato said:

RG2015 said:

How do Chase plan to make any money in the UK?

No overdrafts, credit cards, fee paying accounts, as yet. Just loss leaders.

I am sure they are working on those things. Starling is a loss leader too, having made hardly no profits since its beginning.

I have never paid anything to Starling, having been a customer for several years now, despite using the current account as my main account for spending (including abroad). How do they make money out of me? I don't have a credit card nor using the overdraft.

As before, go and do your research, Starling is on an investment cycle building new platforms for future profitability and this is why they are getting private equity investment. The intention is to invest money in building these services to be one of the future digital banking platforms at the centre and driving the future digital banking world. The fact it is making any profit is pretty good and is more token than required from an investor point at this stage to give it a public view to give retail confidence.

Chase is in a whole different world where its stakeholders will be demanding to see profitability of the UK arm in very short time and will not tolerate a loss making business for long.

sebtomato

400ixl said:

Chase is in a whole different world where its stakeholders will be demanding to see profitability of the UK arm in very short time and will not tolerate a loss making business for long.

Sounds like Chase has been building its capability for the last 3 years already, "in secret". Hardly an indication of willing to see profitability in a very short time...

I am struggling to understand the logic where, the subsidiary of a very profitable company would need to make some profit in a very short time, while a standalone bank like Starling could afford to be a loss leader for years to come.

If another "app" bank was to offer better rates, then people would move. Exactly my point. We are talking about younger people or tech savvy people using "app only" banks, and the ability to create new accounts in minutes without completing paperwork or going to a branch. Hence why I think Starling is going to lose a lot of its personal customers to Chase, particularly if Chase starts adding some missing features like overdrafts.

400ixl

Just repeating the same point of view without the knowledge of the industry is going to go around in circles. Do some research one what people have told you about where Starling is positioned in the new digital fintech world and where it actually makes money today and plans too in the future. Then look at the history of US banks launching products in the UK and how that has gone for them over a 5 year period.

Then you will start to get a view as to why Starling are not going to go out of business and there is more chance that Chase will pull back in the coming years.

To give you a parallel to another industry. Starling is doing what Amazon did a decade or so ago, Chase is doing what Walmart did in buying Asda to try to expand in the UK.

Which one did that work out for? Not saying Starling is going to be the size of Amazon, but its using the same principles of building platforms and market places.

Daliah

RG2015 said:

How do Chase plan to make any money in the UK?

No overdrafts, credit cards, fee paying accounts, as yet. Just loss leaders.

This is almost certainly one of the questions the JP Morgan shareholders have been asking, and to which they don't appear to have received satisfactory answers so far.

RG2015

Daliah said:

RG2015 said:

How do Chase plan to make any money in the UK?

No overdrafts, credit cards, fee paying accounts, as yet. Just loss leaders.

This is almost certainly one of the questions the JP Morgan shareholders have been asking, and to which they don't appear to have received satisfactory answers so far.

Yes, and thanks for the link to the Times article.

I have dealt with JP Morgan in the past and their position in the UK was very much high end personal and corporate. Therefore their experience within the UK retail sector is limited.

This added to the current UK tradition of "free" banking being alien to most other countries, especially the US, will demand a pretty steep learning curve.

sebtomato

400ixl said:

Just repeating the same point of view without the knowledge of the industry is going to go around in circles. 

Yes indeed. Lucky we have you to share your business and industry knowledge with us. We shall see how it goes.

The comparison with Amazon is poor: Amazon's e-commerce strategy has been to become dominant in the long term, by losing money and driving other competitors out of business (working fine in the UK). Once that's done, Amazon will increase its prices.

As for AWS, it was actually a bit of an accident as opposed to a strategy, and that's what's making the bulk of Amazon's profits now, interestingly.

 Starling is not driving the competition out of business, as far as I am aware. It's not discounting its services, providing cashback or nice interest rates to get rid of all competitors either. I think it's losing thousands of customers to Chase currently.

Might not be an issue if Starling is pivoting to small businesses now, but why acquiring lots of personal users at a cost then?

400ixl

You misunderstood what Amazon were doing. They were building a platform business, it wasn't about driving others out of business. It was about creating the market place where they controlled the narrative. AWS as a compute platform was the bonus side.

That is exactly what Starling are looking to do. They want to be the platform that future digital services are built upon and use to conduct business. You are fixated on Starling as a retail bank and can't see the big picture at play here. If you were talking Monzo, then you may have more of a case, but Starling are not what you appear to think they are.