As the UK went into lockdown, there was a massive question mark over how the challenger banks would fare.
Much of their appeal is based on travel-related deals and discretionary spend on nights out. As lockdown began, then, it was not a huge surprise to see figures from Curve, reported on exclusively by The Fintech Times, showing spending on challenger cards instantly dived 90%. Spending on traditional bank cards dropped 60% over the same early lockdown period.
With bars and restaurants shut and travel plans put on hold, the fintech industry was left wondering how would challengers fare as lockdown progressed? What shape would they be in when consumers began to prepare to once again shop in non-essential retail outlets, while still waiting for bars and restaurants to open.
The answer emerging from exclusive figures shared with The Fintech Times by Apptopia, is that Starling is the only challenger with cause for optimism. It is the only neo bank to post better app download numbers for May 2020 than May 2019. To be more precise, with 127,000 monthly app downloads in May 2020, Starling has seen numbers increase by a third compared to May 2019.
With 195,000 app downloads, Monzo was nearly 50% down in May 2020, compared to 2019. Revolut posted a 28% drop to just 78,000 downloads.
The figures show that while Monzo still has larger overall download numbers, Starling is closing the gap and has overtaken Revolut for monthly app downloads in the process.
This turnaround begs a rather unusual question? Was a shed the key to winning lockdown? Or at least, did a shed put Starling in a position where it was best placed to take advantage of bail-out loans for cash-strapped businesses?
To advertise or not?
At the end of March, fintechs were like any other business. The pressing question was whether to pull marketing and advertising spending and sit out the coming storm?
According to Rachael Pollard, Chief Growth Officer at Starling, the company took the decision to plough with a national television campaign for its business banking service. It had previously run a general branding television advert but April’s campaign was specifically aimed at entrepreneurs.
It features a nervous new business starter logging on from her shed and, literally, taking off as her family waves encouragement from the garden.
“Nearly all the competition pulled their traditional and digital advertising as soon as lockdown started, but we thought that would be a mistake,” she says.
“We were able to change the original voice over to let business people know we were there with them in a difficult time and the result has been amazing. In this year so far, we’ve improved our prompted brand awareness scores by 20%, to 73%.”
A bounce back from loans
The original idea for the advert was to tap into business people looking for a smarter way of banking digitally by the campaign coinciding with the start of the new financial year in April. It would be an understatement to point out Starling’s timing turned out be fortuitous.
As the UK went into lockdown, the Government announced the Coronavirus Business Interruption Loan (CBIL) scheme for large businesses and “Bounce Back” loans for small companies borrowing up to £50,000. Starling remains the only challenger bank set up for both schemes.
“With an advert all about people working from home and setting up businesses at the end of the garden, we were saying exactly the right thing and the right time,” says Pollard.
“The television advertising meant people realised they could trust us. It helps to be relatively small and agile because we were able to get people trained up and help with the onboarding because we’ve seen a real rush of new customers. We’ve had a 147% increase in business accounts since we ran our April tv advert and the Government loans schemes were introduced. The biggest increase for us was during May.”
This observation would concur with Apptopia’s figures showing Starling’s app downloads increased for Starling by a third, year-on-year, compared to large drops for both Monzo and Revolut.
Beyond banking for millennials
Another factor, Pollard claims, is that Starling customers are, on average, slightly older than those drawn to the colourful, trendy-looking banking cards offered by rivals. Given the headlines of younger consumers in more junior, less secure roles being harder hit by lockdown, she believes economic factors could also account for Starling growing while rivals’ growth slowed.
She recognises the behaviour laid out in a recent The Fintech Times article whereby experts believe customers are using challengers as secondary banks. Typically, big bills are paid through a traditional account and small sums are put on a challenger card for discretionary spend on nights out.
“That definitely happens, and we do see that,” she says. “We realise we’re new and people won’t want to go from discovering us to the equivalent of a marriage overnight. However, we attract slightly older AB1 demographic customers. We also have a decent amount of people using us for the grocery shop which has been where most of the big spending is currently going, so it’s put us in a better position than rivals in lockdown.”
Both Monzo and Revolut were asked for comment but did not take up the opportunity to contribute to this article.
Business banking features
So, was it the shed that won it? Was it the shed that put Starling in a position to be in better shape in May 2020 than May 2019?
Fintech industry advisor and author of The Financial Services Guide to Fintech, Devie Mohan, believes that there are a couple of additional factors at play. Starling had already seen business banking as a major route to growth and, in her opinion, the smart strategic move has been to partner with external companies. The bank’s marketplace has partnerships with more than 20 providers which include a lockdown offer of free health insurance for business
This agility in its market place combined with two other lockdown initiatives to put Starling on a good growth trajectory, she says. These included offering the aforementioned business loan schemes but also launching an additional debit card that self-isolating customers could give to friends and volunteers to shop on their behalf.
Just as importantly, though, Mohan believes one cannot underestimate how customers that have been researching digital banking under lockdown are looking for an offering that can work like a traditional bank.
“In the past 3 months customers have been looking for digital solutions more frequently than ever before,” she says. “However, this demand is not just coming from millennials or existing app users, but from people who have probably never used a banking app before. And this group will use a challenger bank app only if it also meets their traditional banking behaviour expectations.
“This has been the biggest advantage that Starling offers over its competitors like Monzo and Revolut. Starling supports e-cheques or digital cheque imaging whereas Monzo doesn’t. These types of “traditional-friendly” features also have helped Starling expand in this market to a whole new group of customers.”
The shed and social, won it
While these features and partnerships are important, for Luc Gueriane, Chief Commercial Officer at payment provider, Moorwand, the big step forward in lockdown was clear. Not only did Starling offer loans to large and small customers, it managed to convey a feeling of truly caring.
“Starling was the only challenger bank to offer the government-backed loans for businesses and, crucially, approve these loans faster than anyone else – some being approved in under 10 minutes,” he says.
“And the communication of this offering via social media was great. It positioned Starling as being on the side of small businesses at a time when these businesses needed support the most.”
It is a sentiment shared by Peter Pawlick, who leads the European fintech practice at creative advertising agency, R/GA London. Additionally, he points out that that we might now forget that Revolut, Monzo and N26 (now closed in the UK) all approached lockdown with what, he terms, “their own crisis”. These involved deep-rooted questions about either how they were being run or what their true market value was. Conversely, Starling he claims, was freer to grab an opportunity when it saw it.
“Starling and its investors have been bullish and are likely seizing upon this moment as a breakaway opportunity for the bank,” he says. “With no handicaps, relative to its peers, the bank is accelerating while others may well be decelerating to derisk their account portfolios: throttling their account openings and in some cases even cancelling accounts.
“It’s still too soon to say how things will shake out for Starling and the other challengers post-pandemic but it’s likely that the field will be narrowed and possible that this will prove to be a turning point for Starling.”
So, from a decision to carry on advertising made right at the start of lockdown, Starling was fortunate enough to be in the right place at the right time with the right messaging. Whether it will also be a catalyst for it to fare better than rivals once lockdown ends time will tell.
However, Rachael Pollard reveals the bank is hoping the momentum behind its surge in business banking customers will make up for a predictable dip in new customers this summer. The holiday season is normally a strong acquisition channel for all the digital banks offering a better deal on foreign exchange. It is a potential hole in new customer acquisition Starling’s rivals will also be keen to plug.