UK’s Monzo Bank is not just a challenger bank any more. Its unique products and services are attracting mainstream customers:
Monzo Bank is a UK-based neobank, one of the first of the challenger banks in the world. Starting as a mobile banking app and operating a prepaid debit card, Monzo Bank today is a full-fledged bank, even offering a full current account. Founded by Gary Dolman, Jason Bates, Jonas Huckestein, Paul Rippon and Tom Blomfield, Monzo began operations as Mondo in 2015 and had the record of raising 1 million pounds in 96 seconds through crowd-funding in 2016. Its prepaid card allowed customers to open an account online and for free, receive real-time spending notifications and budget their finances. In 2018, it collaborated with IFTTT, the automation tool that lets one script actions together across apps and services without needing to code, and this collaboration allowed its users to connect their account to smart devices and services. Similarly, it also tied up with TransferWise to provide international money transfers from within the Monzo app.
COMPLETE BANK
Today, Monzo is a complete bank, rather a financial platform, that offers among other things a spending account with modern features, real-time payment notifications at low fees, money management service, splitting the bill and
Virtual account creation and controls, besides a premium account with additional software tooling and perks. In July 2020, it introduced a subscription service, called Monzo Plus, and subsequently a premium subscription service, called Monzo Premium. Meanwhile, it expanded to the US, first by launching its debit cards, but it faced regulatory hurdles since in the US financial services regulation is in the hands of state administrations. It is partnering with Ohio-based Sutton Bank, and will offer many of the products and services it is offering in the UK.
In just 5 years, the bank could acquire 5 million customers, nearly 60% of whom are active weekly, accessing the app more than 50 times a month. Of those who are active, over 40% are using Monzo as their main account. More than 25% of users are adding their salaries to Monzo. As it develops its marketplace function, Monzo is aiming to become a destination app through which customers manage all their financial needs in one place, accessing any number of both proprietary and third-party fintech products.
INDIAN CEO, COO
The bank has 2 Indian origin managers holding key positions – T.S. Anil, a banking veteran, is the CEO and Sujata Bhatia, another career banker, is the COO. They came to the bank in 2020 with the mandate to further improve operational excellence in risk management, lending, regulatory and compliance. When they joined, Monzo was generating $69 million in revenues (in April 2020). In the 18 months since the pandemic began, revenues have scaled to more than $200 million and deposits have grown to $4 billion plus.
Monzo also offers a unique customer support through an in-app chat. Customers can send messages and receive a response quickly, regardless of the time or day, quite unlike traditional banks.
UNCONVENTIONAL TOOLS
Some of the unconventional practices that Monzo has developed and implemented for its customer interaction are ‘Gambling Block’ where customers can disable transactions tagged as gambling, ‘Tone of Voice Guide’ to maintain its clear, concise, positive voice as it scaled, ‘Proactive Transparency’ to go above and beyond in proactively supporting users, ‘Fair-use Fees and Customer-friendly Lending’ for customers who used certain features above normal levels and created higher levels of free allowances for customers who used Monzo as their main account and ‘Internal Inclusion Goals’ focusing on building an inclusive company operating system.
It is expected that the success of Monzo’s first 5 years will spur it on a growth path, expanding within the UK and outside. Especially, it can make use of its technology dominance to bring in better value for its customers. Similarly, its subscription banking product, which offers virtual cards, third-party account connections and advanced budgeting features in exchange for a flat fee is fundamentally disruptive. One of its products, Monzo Flex, is quite unique as it offers benefits both to consumers and businesses. Flex lets users finance purchases over £30 across multiple instalments. Monzo’s natural visibility into users’ spending and financial health enables it to create a product that is better for consumers than traditional BNPL options. Flex may also disrupt the credit card market, as users use their virtual Flex cards instead of credit cards to finance payments.
Monzo is now looking to expand beyond the UK. It has already launched its operations in the US in a small way. One difference the bank is making is that instead of offering the same products that it offers in the UK, it is taking the user-first design and community approach. For example, it is running US-based community events, publishing a public product roadmap, and consistently adding new features. It is also at an advantage to launch features much faster in the US or other markets because of its strong foundation and country-specific product approach.
