RBS enlists Starling to develop digital bank

Royal Bank of Scotland (RBS) has approached challenger bank Starling for help in developing a digital bank of its own.

According to The Times newspaper, Starling’s chief executive Anne Boden has written to shareholders outlining the firms annual results but also revealing that the online only bank has signed a contract “to provide payment services to support new initiatives at RBS/NatWest”.

The report suggests that these initiatives include “a secret project to build a standalone digital bank”.

The deal with RBS is an example of its new platform-as-a-service offering, an API-driven product whereby it provides its underlying payments infrastructure to other institutions looking to establish a digital banking service.

Starling has already struck such a deal with online savings platform Raisin UK.

Starling’s CEO Ms Boden, said: “We believe that the banking industry as a whole is at a tipping point. The API economy, new payments legislation such as PSD2 and Open Banking, together with scaleable Banking-as-a-Service propositions such as we offer, are revolutionising the banking industry.”

She added: “We believe that the fintechs that succeed will be the ones that can maintain growth and operate efficiently at scale while continuing to innovate and deliver an excellent customer experience,” she wrote.

“Anything that doesn’t put customer interests first will become redundant and fail.”

Starling’s annual results showed that from November 2016 to 2017, the startup bank grew its number of accounts fivefold from 43,000 to 210,000 with an average deposit of £900.

Its pre-tax loss for 2017 also grew from £4.3m to £11.9m during 2017, compared to a £33m loss posted by Monzo between February 2017 to 2018.