Full-stack banking

27th August 2015

Last month, 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 visualised 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 recognise. I often describe the Starling stack as the layers of a cake, with the icing being the mobile app that sits 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 start-up technology, we often hear the phrase of a “full-stack engineer” which is 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 start-up 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 the neo-banks such as Simple and Number 26, as well as the pre-paid debit card solutions such as Osper and Ffrees, are great examples of not using a full-stack approach.

Back in January 2014, when I first envisaged the idea behind Starling, I was determined to deliver something really differentiating that would be a step-change in banking experience. Since then we have been building the cake – the lower tiers we want strong and resilient, highly secure and scalable, the marzipan layer needs facilitating features that have never been seen before and the icing is such a beautiful and elegant app design.

So do customers care about whether each part of the cake is delivered from a different kitchen as in the case of customer offerings that are not “full-stack”? For example, in the case of the neo-banks 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 neo-bank which has clean and refreshing customer experience – probably why it is 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 neo-bank 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 will have to wait a while to discover the colour of the icing, but rest assured Starling is very much a full-stack bank, complete with a cherry on top.