In July, we published a view on the changing shape of the UK retail banking market, including a useful infographic describing the existing and new competitors coming into the banking landscape. In the commentary that followed, quite a few people subsequently described Starling as a full-stack bank, and those less familiar with the phrase have asked me to explain. So, here goes.
First, a bit of technology education for the uninitiated. The technology stack is the set of technology products that can be visualized as sitting on top of each other, each dealing with a different set of functions for the bank. Typically, the lower levels of the stack deal with messaging and the higher levels would include more of the functions that a customer would recognize. I often describe the Starling stack as the layers of a cake, with the icing being the mobile app that sits at the top. (I do have to admit here that I last baked a cake in 1984 and wrote production code for a bank in 1989!)
In the brave new world of startup technology, we often hear the phrase of a ‘full-stack engineer’ – someone who has the ability to work on the development of all levels of the bank – ranging from engineering the app to developing all the back-end systems.
Many of today’s startup businesses have been created by delivering something that “customers really want,” to use a Paul Graham phrase, by pulling together a bunch of services accessed by APIs. These are not full-stack since they rely on other components to deliver the solution. In my last blog, I talked about neobanks such as Simple and Number26, as well as the prepaid debit card solutions such as Osper and Ffrees – great examples of not using a full-stack approach.
For example, in the case of the neobanks (or in the case of near-banks, as Dave Birch calls them in his article, ‘Neo-bank and iso-banks‘), the customer has multiple relationships. The most well-known example is Simple, the market-defining neobank with a clean and refreshing customer experience – probably why it’s called Simple. That is, until you need to engage with the Bankcorp Bank, which is where customers’ funds are deposited. A look at the multi-page terms and conditions is definitely reminiscent of the old world rather than the new. Unable to generate sufficient revenue from actually providing the banking components of the value chain, the neobank is sometimes forced to charge monthly account fees.
In banking, above any other industry, the full-stack business model is more critical to the overall customer experience. The regulatory framework enforces a discipline of customer ownership and rigid responsibilities for ensuring that processes are in place to prevent money laundering, fraud and (most importantly) to protect the customer from being mis-sold financial products. This strict division of responsibilities is at odds with the objective of a seamless customer experience.
The recipe for the layers is secret for now, and you’ll have to wait a while to discover the color of the icing, but rest assured Starling is very much a full-stack bank, complete with a cherry on top.
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. You can read the original article here.