Starling needs to offer a unique product to build scale and profits © Financial Times

Not all fintechs flock together. Starling, the UK-based challenger bank that has just raised £60m, wants to stand out from the crowd — or murmuration — by becoming both an Amazon of financial products and an SAP of banking.

Bold targets, both. At its best, fintech is disruptive, massively popular, with a scale — in numbers of customers and suites of services offered — that makes it impossible to ignore. In this category sit US payments group Stripe, Kenya’s M-Pesa and China’s Ant Financial, the $150bn financial services arm of ecommerce giant Alibaba.

But fintech is a broad church. It also hosts the likes of Funding Circle, which listed in 2018 with a market capitalisation of £1.5bn and is now worth just £267m. Payday lender Wonga went bankrupt under a slew of compensation claims.

Many at either end have yet to show sustainable profitability. Undaunted, investors have funnelled $110bn into the sector between 2014 and the first half of 2019, according to CB Insights. One comfort, says the Centre for Finance Technology and Entrepreneurship, is a modest failure rate that it extrapolates from a 50-strong sample at just 4 per cent, versus 34 per cent for start-ups more generally.

There are two key issues for Starling and its ilk, only one of which is truly within their control. It needs to offer a unique product to build scale and profits. If Starling succeeds with its “banking as a service” — a cloud-based back office for payroll, say — it has a good chance.

The bigger task: persuade customers to switch from a bricks-and-mortar branded bank to an app. In the UK, Monzo and Starling are often regarded as a supplementary card for specific purposes: commission-free forex to shop in Europe, say. Actual wages still go into conventional bank accounts. That will change over time, but is unlikely ever to reach the stage of China. There, legacy banking was so poor that mobile transactions should total Rmb331tn this year.

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