Starling Bank has played a deft hand in the race for scale among the leading digital ‘neobanks’. It has always had fewer account holders, when compared to Monzo and Revolut but it has steadily built up its deposit base faster than both, according to AltFi.
The firm is now using some of those juicy deposits to fund consumer loans originated by peer-to-peer lending pioneer Zopa, itself in the last throws of launching its own deposit-taking bank. Starling Bank then buys the loans and transfers them to its own balance sheet with Zopa continuing to service the loans.
A spokeswoman for Starling told AltFi: “Starling is in a unique position among neobanks of having a very high value, high growth and high quality deposits. We currently hold over £1.25bn on deposit and the sum is growing at double digit rates every month.
“While we’re building our own lending capability, we are deploying some of our deposits in forward flow arrangements with selected lenders, including Zopa.
“We carefully consider inorganic opportunities that match our strict risk-return criteria with a view to sustainably growing our balance sheet.”
The deal, whilst eyebrow raising, is not the first between a challenger bank and marketplace lender. Zopa itself instigated a similar deal with Metro Bank five years ago.