Book Review: Banking on it by Anne Boden

Banking on it book cover

Anne Boden, a 50-something female banker with a long career at RBS decides to leave. She gets headhunted to work at the failed Allied Irish Bank (one of the major casualties of the financial crisis in 2008). Whilst she is terribly excited about the innovations in technology deployment at the bank, as chief operating officer, actually, her day job was making people redundant. She left after 18 months.

Boden comes across as someone who doesn’t sit still for long. She mused over her future and decided to set up her own retail bank. Only this one would not have any legacy systems, branches, and crucially, it would not have an IT department. It would be an IT department. The bank would be, as the book cover suggests, an industry disruptor – a business that would strip down products to the basics. No frills. And what it did do, it would do better than any other retail bank. It would interface with customers through a mobile phone app. The core product would be the notoriously unprofitable current account; rendered profitable by a low cost base and intelligent rates for borrowing and saving.

There is much to recommend in this book. We know the ending – Starling Bank was launched and is on the cusp of profitability. It is award winning – though I am never really sure what that means. And as we might expect, the journey to this point has been fraught, involved near bankrupting herself, two unexplained burglaries and a big fall out with the core team about strategy. As a 50-something bloke, the idea of a 50-something becoming a successful entrepreneur is inspiring. I am myself embarking on ventures that perhaps should have been done a number of years ago. But there you go. What this story tells us that there is never a wrong time, but don’t expect to have a life if you try. And if one is going to set up a bank, expect to have to do a deal with the Devil (more of this later).

Here are a few things of note for budding entrepreneurs:

  • Silicon Valley’s investors may not be receptive to non-Silicon Valley start-ups;
  • contingency fees from consultancies and lawyers may not be honoured by investors;
  • even if one thinks that the idea is original, it is not. Someone else is working on it simultaneously and they may be competing for finance with you;
  • scalability will be important – can the business be expanded/grow without adding costs? (p33);
  • build a network full of goodwill (being 50-something can help, providing one has not hacked people down on the way up in a previous life) – (p63)
  • if the business is a disruptor, the incumbents will not sit back and watch (p66); but in mature industries – like banking – they might not know how to respond (p251-2);
  • watch out for a coup attempt – those brought in to develop the business may see themselves as better able to build the business and launch. The leader of the coup will require the rest of the team to choose between you and them (pp125-6);
  • the media will pounce on stories about a coup/disagreements. PR needs management;
  • failure is normal for entrepreneurs. Investors value experience. In Silicon Valley, recording failure is part of the culture. The place where this is done is medium.com (p138);
  • it is possible to lose a whole team, be close to ruin, but start again and learn from the mistakes – primarily, getting the right people. The signs are there if one cares to look;
  • it is staggering how much can be done just using email;
  • so-called Real Options are revealed sooner than expected, but must be embraced. Setting up the businesses is only the start;
  • the team that launched the product is not necessarily the team to see it in to the future;
  • potential stakeholders/investors are watching – keep an eye on the email. Unfamiliar names may not be all bad.

Talking of bad. The bank got approval from the UK banking regulator to trade. I’m not quite sure how this works, but it does involve a lot of meetings, paperwork, disappointment and finance. It may not matter where the finance comes from. In Starling Bank’s case, Boden got an email from a mysterious investor, Harald McPike. Austrian, apparently. The eventual deal was done in the Bahamas on board a 92 metre yacht. £48m was pledged in exchange for 2/3 of the equity. So, essentially, Starling Bank is owned by a secretive financier based in the Bahamas.

That led me to a wider question about motives. Boden sees her core customers as younger types who live largely from their mobile phones. I get that. But why did the bank need to ape existing ownership models; namely venture capital based in the Bahamas? In these post-financial-crisis days, surely more of the same, albeit on a mobile, is falling short of truly disrupting? Why not a co-operative or other mutual model? Democratise banking and roll back the bank-as-an-end-in-itself principle.

There is absolutely no sense that Boden (left) might have had any reservations about the source of her capital, and that the profits would be offshored. It is not only McPike, she also sounded out Jared Kushner’s brother, Josh, in New York and John Thain famous seemingly for spending $141k on rugs for his office whilst he was at Merrill Lynch.

And what about ethical standards? The only mention of ethics was in a discussion as to whether it was ok to buy a competitor’s domain name (p197)! The website does have an ethics statement which explicitly excludes certain business customers such as arms traders. There is a commitment to planting trees, some reference to energy and supply chains. Nothing, though, that says, “this is the bank for me”.

Pic: Anne Boden, Charlottelorimer 

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