Digital challenger bank Starling Bank has grown its market share in the SME banking space to 7.5% in just four years.
The mobile-only bank has increased its share of the number of SME accounts in the market reaching half that of mainstream rival, Barclays.
“We’ve had some big successes recently, we now have 7.5% market share of the SME market in the UK and we’ve done that in just four years,” said chief executive of Starling and Swansea-born Anne Boden, who founded the bank in 2014.
She added: “We’re now the most switched to bank in the UK in the last four quarters. More people are switching to Starling than any other bank and 68% more than our next competitor Lloyds Bank.”
In Wales alone, Starling Bank has seen a 41% year-on-year growth in the number of business accounts opening, with the total number of business accounts open now at 14,760.
During the coronavirus pandemic, Starling Bank gave out £1.4bn in Covid bounce back loans to its business account customers, with 66% of recipients based outside of London.
Ms Boden said the bank was continuing to support those SME customers.
She said: “Many of them took out bounce back loans and CBILS and we are managing that process and making sure we do the right thing in supporting them and taking care of taxpayers’ money.”
The Bounce Bank Loan scheme was set up in April 2020 by the UK Government to keep small businesses afloat during the coronavirus pandemic.
A total of 1.5 million loans worth £47bn were issued through the initiative.
However, the government has estimated more than a third of loans will never be repaid due to fraudulent activity and legitimate borrowers defaulting.
State-guaranteed loans were handed out with only light checks on borrowers.
Asked whether she anticipated the Treasury might ask banks to take greater responsibility in pursuing fraudsters where proper due diligence wasn’t met, Ms Boden said all banks were mandated to carry out very rigorous fraud checks.
“The bounce bank loan scheme was intended to get loans of up to £50,000 to small businesses as quickly as possible. Starling did all those checks,” she said.
“With a scheme of that size there was always going to be fraud. But there’s no expectation at the moment that, in the scheme as a whole, that fraud will be more than anticipated.”
She added: “If a bank has not carried out the processes as they were defined, then the bank has to take responsibility. I can only speak for Starling but we did all the fraud checks necessary. I think the majority of banks did that as well.”
“The overall percentage of fraud is probably within the expected levels set at the start of the scheme.”
On the Welsh Government plans for a new community bank in Wales, Ms Boden questioned the cost of rolling out 30 outlets to communities.
She said: “We have free banking through propositions such as Starling that provide these services. If it’s not just to provide free accounts, is it to provide something else on a high street?”
"The question of what's the best way of engaging with communities at this time, it's probably a combination of the post office and digital banks," she adds.
Any community bank, which will be run by Monmouthshire Building Society, would require regulatory approval and a fundraise of millions for the necessary bank reserves.
Ms Boden also said that, while people will need a location to access some services, over time those sites will likely become the post office or a shared branch network.
“But don't assume that it's the older generation that wants these branches to stay open or can't use digital. We have customers in their 90s using our services,” she said.
“The recent pandemic has meant a lot of people have progressed to technology for the first time. Their mobiles are now their link to the NHS and to their family. More people are going digital and more want convenience.”
