The price of rapid expansion without proper safeguards has been brutally demonstrated by Starling Bank’s combined £57 million hit from regulatory fines and loan losses, serving as a stark warning to the broader fintech sector about the dangers of prioritizing growth over governance. The digital bank’s current predicament illustrates how quickly innovation can turn into liability when compliance takes a backseat to commercial ambitions.
Starling’s troubles are rooted in its pandemic-era strategy of aggressively expanding its business lending portfolio through the government’s bounce back loan scheme. While competitors maintained cautious approaches, Starling threw open its doors to new customers, processing applications at unprecedented speed and scale. This approach initially seemed vindicated as the bank’s customer base exploded and its profile soared in the fintech community.
However, the true cost of this strategy is now becoming apparent, with CEO Raman Bhatia admitting that the bank’s controls were insufficient for the volume and pace of lending it undertook. The £28 million in loan losses, combined with a £29 million regulatory fine, has wiped out a quarter of the bank’s profits and forced a fundamental reassessment of its business model and risk appetite.