How Starling Bank is taking cues from Amazon

As customer expectations in banking are increasingly shaped by Amazon and Google, banks are slowly evolving to meet customers who are more comfortable interacting through a branchless digital interface. And digital-only banks with a license, like Monzo, Starling, Tandem and OakNorth, are growing market share. Megan Caywood, co-founder and chief platform officer at Starling Bank, helped set up the 3-year-old Starling to meet a customer need for a user-friendly digital platform that could act as a nerve center for an individual's financial life. Last year, it launched a consumer checking account, and in January it launched an online marketplace that connects to a range of financial apps, including PensionBee and Wealthsimple -- a trend major U.S. institutions like Citi and Goldman Sachs are beginning to adopt as well. Tearsheet caught up with Caywood at the Empire Startups fintech conference in New York on Wednesday to discuss the state of banking and the problem with banks that focus too much on products but don't look enough at end-to-end user journeys. The following has been edited for length and clarity. What are the biggest problems with banking today? Banking as it is today sucks -- it's hard to easily manage account openings, and [until recently] to send payments to friends. That's why Venmo has been so successful, but this should be a thing banks do.  You shouldn't have to read an FAQ to use the mobile app or set up a bill pay. How did we get here? Banks were reasonably good at keeping up with technological changes until 2008. Then there was the financial crisis. Innovation dropped to the bottom of the priority list. A gap was emerging between what the banks were offering and what the customer was expecting in terms of how intuitive, simple and real-time the products and services should be. What customer issues is Starling trying to solve with its mobile platform? There's so much low-hanging fruit with improving the user experience, getting a real-time view of spending, making it easy to set up an account, settle up and set savings goals. The next level of that is the marketplace; we want to give customers transparency and choice. What can Starling do that traditional banks can't? The main thing is user experience. If you talk to a product manager, they'll tell you about interest rates, where tech focuses on user journeys. We wanted to take that lens to banking. We have real-time, location-based notifications, so you can see the location the transaction took place and details in real time. We offer spending insights, location-based intelligence [so the app knows] when you're traveling. We've integrated loyalty points via the Starling API, so as you're spending on your Starling card, it automatically recognizes [retailers' loyalty programs the customer is part of] and you're gaining points. How do you differentiate from other challenger banks? Many in the space see backend technology as a commodity, but we see it as a huge differentiator. For example, if we had a great idea to develop an algorithm for fraud, we could talk to our engineers who could build it in a few weeks, as opposed to waiting months or years if you're using someone else's infrastructure. How do you maintain a high level of personalization without a branch network? If you have an issue with Amazon, do you need to go to a branch to resolve it? It just doesn't happen with tech companies. We have 24/7 customer support and live chat. Customers email and call us. The ways of interacting with us are synonymous with a tech offering, so you can get help even if you have a problem at 3:00 a.m. on a weekend. How does Starling generate revenue beyond interchange fees? Our cost basis [compared to traditional banks] is different. We only use cloud hosting, then there are the same ways [as incumbents] of generating revenue like accepting deposits and lending. We also have payments services -- we charge other parties, including fintech companies and other challengers, to use our payment schemes. The marketplace generates affiliate revenues and referral fees, and it's a very-low-cost base to sustain that. How do you acquire new customers? We do mostly SEO-based digital advertising, but most of our growth comes from word-of-mouth referrals. Our cost of acquisition is about $10 per customer.  What keeps you up at night? I'm not worried about challengers since there's so much differentiation among them. If I had a worry it would be about scaling -- we're scaling throughout Europe now, and the next step is the U.S.