Starling’s results are further proof that high interest rates could be a boon for fintech
Earlier this month, we have noticed that several popular US fintech companies are seeing rapid revenue growth thanks to high interest rates. Basically, interest income was helping to offset the decline in consumer trading activity at Coinbase and Robinhood as people retreated from active trading when the economy deteriorated.
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Some of this economic deterioration has been caused by rising interest rates around the world, but with countries taking a more measured approach to interest rate hikes, it could be said that we are approaching the rate environment. peak of the current economic cycle. Either way, this increase in interest rates has created a huge growth opportunity for fintechs, both public and private.
Enter Starling, a UK-based neobank that has raised $1.1 billion to date, per Crunchbase. The company is making headlines today due to the departure of its longtime CEO and founder, Anne Boden. As TechCrunch’s Ingrid Lunden pointed out in her post, if there’s an underlying story behind the time of departure, it’s unclear what it is.
But I have a guess. On reading the latest annual report of the company, it is clear that the neobank is in the process of improving its financial foundations. For a long-time founder, driving his business to great success is a reasonable time to take a break. That’s my guess.
What drives Starling’s good results? There are several contributing factors, but chief among them is – you guessed it – increased interest-based income. Let’s take a look at the numbers this morning to see if we can expect other neobanks to enjoy similar gains.
The starling takes flight
In the financial year to March 31, Starling reported total revenue of £414.8 million on revenue of £452.8 million. If you question the accuracy of these numbers, rest assured that they are correct. Total income at Starling is the sum of net interest income, net fees and commissions and other income. Net income, on the other hand, is the combination of net interest income, fees and commissions, and other income.
In short, revenue does not take into account fees and commissions, which totaled £38m during the year.