Earlier this month, we noticed that several well-known US fintech companies were seeing rapid revenue growth thanks to high interest rates. Mostly, interest-based income helped offset a decline in consumer trading activity at Coinbase and Robinhood as people pulled back from active trading as the economy soured.
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Part of that economic meltdown was due to rising interest rates around the world, but as countries take a more measured approach to raising interest rates, you could argue that we’re approaching the peak rate of the current economic cycle. Regardless, this rise in interest rates has created a huge growth opportunity for fintechs, both public and private.
Enter Starling, a British neobank that has raised $1.1 billion to date, per Crunchbase. The company is in the news today as its longtime CEO and founder Anne Boden is stepping down. As TechCrunch’s own Ingrid Lunden noted in her article, if “there is an underlying story behind the departure time, it’s not entirely clear what it is.”
But I have a hypothesis. Reading the company’s latest annual report, it becomes clear that neobank is improving its financial situation. For longtime founders, seeing their company become a clear success is a reasonable time to rest. That’s my guess.
And what is driving Starling’s strong results? There are several contributing factors, but chief among them is, you guessed it, rising interest income. Let’s look at the numbers this morning so we can expect other neobanks to make similar gains.
In the financial year ended March 31, Starling reported total revenue of £414.8m on revenues of £452.8m. If you are interested in the accuracy of these numbers, rest assured that they are correct. Starling’s total income is the sum of net interest income, net fees and commissions and other income. Net income, meanwhile, is a combination of net interest income, fees and commissions, and other income.
In short, the revenue does not discount fees and commissions costs, which totaled £38m a year.