Challenger bank Starling Bank has raised £50 million in a Series C funding round led by Merian Global Investors through its Merian Chrysalis vehicle.

Existing Starling backer Harald McPike, a Bahamas-based hedge fund investor, invested a further £25 million, bringing the total raised to £75 million.

The bank will use the money partly to support its SME banking as well as to launch other products and expand into Europe.

Since launching its app in May 2017, Starling has built up a customer base of 30,000 SME accounts.

Merian Chrysalis was created specifically to invest in late-stage private companies and has £6 billion of client investments under management.

Its parent Merian Global Investors has a total of £28.9 billion under management.

The Starling announcement underlines how fintech has become the hottest investment sector in the UK.

Investment in British fintech rose by 18 per cent in 2018 to $3.3. billion, according to Innovate Finance.

Late-stage private-equity investment rose by 57 per cent to $1.6 billion, while venture capital dipped to $1.7 billion as the UK fintech sector continues to mature.

That said, the UK kept its position as world leader, ranked third globally in VC investment behind China and the US.

Challenger banks such as Monzo took the lion’s share of UK VC fintech investment at 27 per cent of the total.

Global VC investment in fintech was on the way to tripling last year, with a record $36.67 billion ploughed into 2,304 deals.

Starling hopes to add to its coffer in the coming weeks, having applied for a share of a £425 million fund paid for by Royal Bank of Scotland to increase competition in the business banking market. The first recipients of the funds are expected to be announced later in February.

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