Questions Over Volume Of Customers Taken On During Covid Crisis” Starling Bank”
The more than tripling of business customers has raised concerns about the ability of online lenders to conduct proper checks.
According to the Observer’s analysis, the online bank singled out by a former government minister for the effectiveness of its anti-fraud measures was “onboarding” an average of 15,000 new business customers per month during the Covid crisis.
According to Starling Bank’s most recent annual report, the eight-year-old lender’s business customer base has grown from 87,000 before the pandemic to 330,000 business accounts as of last spring.
Banks are required by law to conduct rigorous checks on new customers in order to prevent fraud and money laundering.
Analysis of the bank’s annual report, confirmed with Starling, shows it took on up to 243,000 new customers – an average of more than 15,000 a month – between November 2019 and March 2021. This was despite having just 1,245 staff, only a portion of which would have been checking for potential problems.
The number of new accounts is significantly higher than that of the UK’s largest high street lenders. According to sources at some of these banks, they typically take on between 1,500 and 8,000 new business customers per month.
Starling claimed to have benefited from the Covid lockdown, during which most major lenders closed their branches and struggled to meet the demands of existing customers. The digital lender claimed that its technology enabled it to onboard new customers, including those seeking government-backed Covid loans, at a rate that larger banks using older technology could not.
However, the large number of new customers, as well as the increase in loans distributed by Starling during the pandemic, have raised concerns about the company’s ability to conduct proper checks.
Former minister Lord Agnew accused the bank last month of failing to properly vet borrowers before making taxpayer-backed loans, but Starling’s CEO, Anne Boden, has since threatened legal action against the Tory peer for what she called “defamatory statements.”
Kevin Hollinrake, the chair of the all-parliamentary group for fair business banking, said Starling had questions to answer. “Public scrutiny should always accompany public money. Although I have yet to see any firm evidence of inappropriate lending, Starling must urgently answer very valid questions including its current and future default and fraud rates on government-backed loans,” he said
Starling had only lent £23 million prior to the pandemic, excluding loans purchased from other companies. According to a company trading update, it had distributed £1.6 billion in bounce-back loans by June 2021. Rishi Sunak, the chancellor, introduced the scheme, which offered up to £50,000 per customer. The loans were distributed by high street banks, which charge interest – albeit at a reduced rate of 2.5 percent – in exchange for distributing the funds, but the taxpayer is obligated to refund the full amount if customers default.
Starling, which was founded by Boden, a former Royal Bank of Scotland and Allied Irish Banks executive, in 2014, said its systems were designed and built to routinely process customer volumes at this level and more. A spokesperson said it had “one of the best banking platforms in the world, which we built from scratch” and that its systems “were designed and built to routinely process customer volumes at this level and much greater”.
Each loan application had been checked for fraud flags, Starling said, and it claimed to have put in more controls than many of the other lenders, and more than were prescribed by the scheme. It said that, as an example, it automatically checked bounce-back applicants against the Companies House register, verifying the company formation date.
