UK digital challenger bank Starling has been very busy of late, announcing a Faster Payments tie-up with Vocalink, its European expansion plans and a new payments division. FStech’s Editor Michelle Stevens sits down with chief operating officer Julian Sawyer – who is also leading the new payments service – to discuss open APIs, coming out of beta and why Starling is really the UK’s fifth clearing bank.

Tell us more about the payments division that you’re heading up at Starling Bank.

Starling Bank got its banking licence in July 2016 and we joined Faster Payments in January this year. The day after we went live people started ringing us up asking if we were going to sponsor with Faster Payments. So what we’ve done is create a new division, Starling Payment Services, which provides sponsor access into the Faster Payments Scheme and will be the only organisation offering real-time indirect access, whereas everyone else is using batch processing. We are API-driven for fast integration, so the speed of onboarding can be as little as 12 weeks including the due diligence, integration and testing. We’re not going to differentiate on pricing between companies or the service available to them, and we’ll also offer access to Bacs to give Direct Debits and Direct Credits, and at the end of the year we’ll be offering SEPA.

To make this Faster Payments service possible you’ve partnered with Vocalink…

At Money 20/20 we announced an exclusive partnership with Vocalink to provide direct connectivity, meaning that a client buys the gateway software from Vocalink but we have overarching accountability for their sponsorship services. Our new service will see the opening up of the ‘Directly Connected Non-Settlement Participant’ category of the Faster Payments Scheme, of which PayPal is the only current member. There are reasonably big Faster Payments players out there processing a couple of million transactions a year, who are looking to get their costs down, have closer direct access and ‘own’ their own payments technology. Starling is therefore offering real-time In-Direct Access and Direct Access with our Vocalink partnership, and a migration path between them both.

Nick Ogden unveiled ClearBank earlier this year, which has laid claim to be being the fifth clearing bank in the UK, and the first for 250 years. How is Starling positioning itself in relation to ClearBank?

Well, we are live now and ClearBank is not – so if you have four clearing banks and what we are offering is clearing services, wouldn’t you call us the fifth clearing bank?! ClearBank are in their banking licence process and have got a step to do which is called lifting restrictions, so up until then they can’t take customer deposits. We got our restrictions lifted a couple of months ago, which has enabled us to go public with a range of things that we are doing, including this. We are a payments services only business, and we’re opening up the payment rails for other financial institutions, FinTechs, banks and corporates to have access to payments. I think what ClearBank is offering is more around banking services and opening up their banking services platform, which we are not doing. We are currently the only disrupter in this space, but in Q4 ClearBank will come on board and be the second disrupter – so there will be two innovative technology companies doing things in the market, which will be really interesting.

In terms of the Starling current account and app, are you still in beta phase?

We have been open in the App Store since May, and we are onboarding several hundred customers a day. It is in beta, so if you download the app it will ask for a passcode, and you’re effectively in a queue to get the account.

So when do you think you will be coming out of beta – do you have a rough timeline?

No, not particularly. I think it is around when we are confident and our customers are confident in all the features. The core banking aspects are very stable and we have been live in beta now for many months, so actually the core banking aspects are working and we are introducing new features or upgrades on a fairly regular basis – probably once a fortnight or so.

Starling also signed up to the Current Account Switch Service this year – how is that going?

Yes, we went live with that in February this year, and we are the only mobile-only current account switch proposition. We have completely automated the process for account switching – which actually when you get under the covers a lot of the other banks haven’t – and we have been really pleased with the response and are seeing above average switches. People have switched and are using us as their full current account with salaries coming in. We thought people would take a few months of playing, putting £100 in and using their card, then doing the same again, but people have moved quite substantial balances to us, in the thousands of pounds.

Starling has signalled its intention to roll out Pay by Bank [where consumers can make mobile payments directly from their own banking app]. What stage are you at with that and when do you anticipate it going live?

We anticipate we’ll be in the market in Q3, as our aim is to be the second bank to join – Barclays is already live. Pay by Bank is an exciting prospect, particularly for online payments and also bill payments. So you would receive your utility bill, get a QR code, scan that from the Starling app and then make the payment. Normally you would have a direct debit to set up, or have to turn to the back of the bill and search the small print to find out how to make a payment. Pay by Bank is exciting for us, and as an innovative company we want to be playing a role in that.

You also did a deal with TransferWise a few months ago – they are utilising your API, so Starling users can make in-app FX transfers using the TransferWise functionality. What is the thinking behind that?

So we have a concept of ‘Marketplace’ within the app and within our business, which is to interface with other organisations that offer some amazing products or services that we don’t specialise in. One example would be Moneybox, which is a savings organisation that basically sweeps money from your current account and puts it into your ISA by rolling up your pennies to the nearest pound for each purchase. TransferWise is part of Marketplace and deeply integrated into our app; so what you would do is request to make a payment, on payment flow say you want to do a foreign exchange, and then navigate from pure Starling screens to TransferWise Starling screens. The identity and anti-money laundering checks are all done by us, enabling you to get the best value FX from TransferWise without having to set up or log into a new account. We see this platform model as being absolutely core to our strategy. We are going to do one thing and do it really well – which is the current account, then connect to other companies who are doing their products really well. PSD2 – which is a positive thing – and our open API approach means we are receptive to those businesses linking in and integrating with us, because it will help our customers use their products and help their customers get access to an open bank current account.

Although a digital-only bank, Starling still has a call centre, which sounds like it operates on an interesting model. Could you explain more?

We have a contact centre operating in our office in London 24/7, which is a support function not a service function. So the staff can’t make a payment for you, but they will help you with your onboarding or if you have a service issue with your account. The support centre’s channels are voice, web chat, and also in-app chat and messaging. We have not used any bots or artificial intelligence, so we have to train the agents really well, as they could be asked any question. What’s key is that our customer contact centre is in our office with us – it’s very much part of our core business and there is a lot of interaction from a cultural perspective between the teams. One of our initiatives is called Passport to Starling, so people can join our contact centre – and most of our contact centre agents have a degree – then ‘passport’ to any other part of the business, either temporarily or permanently. Then when they come back to the contact centre they obviously know a lot more about the business, what we’re doing and why, and they also can sell what operations does to the rest of the business. This whole concept helps us recruit really bright, enthusiastic and smart people into a job where they can feel part of the mission that Starling has.

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