Y Combinator invests in Monzo through its Continuity Fund
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Some of the larger banks have begun introducing features to compete – stuff like being able to freeze and re-order cards. So that's good. At the point it was introduced though, the experience was notably better than any other option.
For me as a customer, the main goal of a retail bank is to store my cash, make it accessible, keep it secure, and notify me about transactions – basically, keep out of the way as much as possible. It's good at that, better than any other bank I've used, and I think that simplicity is underrated.
The fact that I can see all my transactions, automatically categorised, in an app that is much prettier, full-featured and simple than the crap that Halifax put out, is brilliant.
Combine that with a simple setup process, never having to interact with humans or call centres, and add tha bility to automatically save, interact with IFTTT etc and you have a very compelling package and I hope they continue to do well
Many people would argue this is a tech company's biggest flaw.
I can understand "never being able to" being a flaw. But if I can get my stuff done without talking to someone then that is brilliant. I don't have to go out of my way to go somewhere, I don't have to bother with a bad phone reception, I don't have to wait in a line for it to be my turn. I just do the things I need to do when it is convenient for me.
If I want to open a savings "pot" (Monzo version of a savings account). Then I can do it on the bus on the way to work. I don't have to take time off to go to a branch, or prove I am me on a phone call etc. I just use the app, and it's all done.
I have to say the best thing about Monzo is their customer service, it's really fantastic compared to other banks. I have other problems with them though - I won't use them with their 50p per day overdraft charge, even if you only go slightly into it; this persecutes poor people - it's much fairer to charge a flat percentage.
It seems everything old is new again. At least with a normal CC I have access to a bank branch so I can talk to a real person if I need to.
They have a lot of fascinating and useful DNA having gotten started in the UK before the US. The UK's regulatory environment for digital banking is leagues ahead of America's, w/r/t data access, APIs, etc. If they can persist UK style data features through their American rollout, they'll have something no other American bank currently offers.
While my strong suspicion is that the UK's push for digitization / interoperability in the financial sector stems from Orwellian nanny-state ambitions that would be right at home in China's playbook, it would be fantastic if we could somehow manage to empower customers with access to their own information without similarly empowering data-thirsty governments to surveil and oppress.
The scary parts are probably going make headway regardless, so cheers to the silver lining in the interim.
Because as a UK customer I see no reason to switch after trying Monzo for a couple of months.
Positives:
- a nicer mobile banking app
Negatives:
- no credit cards and no option to top up using a credit card from another bank
- no physical branches
Everything else is comparable to most other banks in the UK. Which isn't bad, just nothing worth switching banks for.
I'm constantly surprised by how useful the app is.
I’ll also admit I have on occasions gone through my transaction history the morning after to work out which bar I ended up in.
Massive positive for me. I've never had a good experience going to a physical bank branch (if they're ever even open), and now I'll never have to go again
After waiting a couple of minutes, a lovely lady sorted out my problem with no fuss at all.
I agree, mostly I never need to step foot in a branch but sometimes it helps to be reminded that there are advantages of doing business 'face to face'.
For most banks, they might as well not have any branches as I can't get to them at a reasonable opening hour and they have no incentive to change that.
And meanwhile First Direct has a mediocre website and terrible mobile app experience when compared to the likes of Halifax, TSB, RBS, Barclays, all of which are sub-par compared to the likes of Monzo or Starling as far as the app experience goes.
Then again, Monzo and Starling don't have a desktop experience, so good luck if you wan't to do anything more than just looking at a few transactions on the go.
A branchless bank must have an alternative
Can you top up your HSBC account with a credit card from another bank? A Monzo account is just another bank account.
> no physical branches
Is this really a con? Last time I visited a branch (Nationwide), I was told to just go online and fill in the forms. Monzo let you deposit cash and cheques at the post office - my post office has better opening hours, shorter queues, and there are more of them than branches of my specific bank.
That's a good point. But with the low exchange rate and a modern app, they're also (willingly or not) competing with Revolut. I can top up a Revolut account with a credit card.
I do think that comparing a bank account to a prepaid card is a little too much of a stretch thoigh.
Not quite. You can deposit at any PayPoint location (mostly corner shops and the like), not Post Offices [0]. They also charge £1 for each deposit and the maximum deposit is £300. This is not an issue for me (I rarely see or use cash), but it would be for some.
Having made my first deposit at the weekend, the main issue is that the shopkeepers have no idea how to accept a deposit. I tried four places, and only managed to succeed in the end because I instructed the shopkeeper how to do it.
$10000 dollars cost £7,867.91
I googled $100 USD to GBP and it comes out as: £7,859.50
Percentage difference: 0.106947%
https://www.mastercard.co.uk/en-gb/consumers/get-support/con...
GBPUSD spot is 0.002% wide (so you’d expect to pay ~0.001% for a single, instant transaction up to several million). It’s not actually too difficult to access this through a brokerage.
That said, if you could really get 0.1% from them it’d probably be considered good at retail.
Is that a good thing?
The use abroad is fantastic and it's the reason I originally got their prepaid card. Some UK banks do offer a similar service with no fee and/or low exchange rate, I think Nationwide's clarity card is one but that's a credit card so withdrawing cash is costly (IIRC).
I also like Monzo's saving pots idea but since they apparently can't provide any proper financial statements to go along with them they are pretty useless to me. I really don't understand how that is supposed to work if you need to complete a tax return.
My local bank branch closed down last month. And to be honest it was a frustrating experience of queueing up to talk to someone who sometimes knew less than what I read from the website.
So, considering how trivial it is to switch current account in the UK, I'm looking at it from the other angle - why would I stay with my current old-school bank?
Monzo having 1 point of contact means they can't push you off onto someone else/a branch/a different phone number etc. And every time I've used the help chat on there I've had me issues resolved rapidly.
When I was in mexico, a restaurants card machine said a payment didn't go through, but my monzo app said it did. So i kept the receipt and did the transaction again. This time their card machine said it worked. I kept the receipt for a week in case the £60 showed back up in my account but it didn't. Within 2 minutes on the chat with monzo, £60 was just put back into my account. No fuss. I guarantee you couldn't pick up a phone/go to a branch with a standard bank and get the money back that quickly
I've switched all my banking to them. So much better than high street banks and I haven't had to talk to a single person.
1) I need to have foreign currency accounts. My bank has them, but I'm unable to see the accounts when I log in. They've known about this for 4 months now, and I keep getting sent in circles by the Indian call centre. They've sent me to branch twice, with no coordination, the people in the branch can't help me either.
2) I need to have an end-of-year statement for my taxes. It seems someone messed up the SQL or something, because I have statements for every month, except the end of the year. They haven't fixed this either.
So I've started looking around for other banks, but most of the challenger banks don't do multi currency accounts.
I'm in the market for a new personal account as well. Revolut works just fine technically, but I don't like what's being said about them and I'd rather not support them now.
It would be nice to have business and personal together, but that seems hard to find among the challenger banks, since they seem to not do FX. (I've emailed several over the past week.)
Lastly TransferWise does Borderless, which seems like exactly what I need, but it seems to not be a real bank account. Certain online businesses require withdrawals to be to someone (or a business) whose name matches what they have as their account details, and that doesn't work with their scheme.
Last pain point for us is getting a USD account in USA so we can cashout Paypal USD balances. Found companies that promise ability to do this but after wasting lots of time turns out they can't.
https://www.icomparefx.com/how-to-send-money-from-paypal-to-...
I'm not sure they do company accounts though.
The purpose, of course, is to keep the banks from central Europe out of Sweden, and that includes N26 et. al. They have very little interest or ability to compete with them, neither in terms of fees nor UX. Fortification and minefields are therefore the best alternatives.
A few years ago, the CEO of a (then) new investment bank famously said that they will be the last bank created in Swedish history, due to the above.
So don't do that?
I think I still have a 'regular bank' account open, but I don't use it at all. Salary goes into Monzo, and payments go out. It's the only debit card in my wallet and that I use.
I didn't switch wholesale because I'm not fully convinced. I feel these new banks and bank-like offers will for some time search for a right fit and may change or disappear in the next few years.
Also, no-fees-abroad is a great feature, but perhaps not the 10x to spur (my) wholesale adoption.
Maybe I'm just not an early adopter (although I use them abroad, so in a way, I am).
As I understood it current (checking) accounts don't really make any money, they're just used as loss leaders to lure in customers.
Additionally new regulations are coming in (in the UK) banning you from charging a daily overdraft charge [1], torpedoing it's one source of income, which doesn't jive with it's doubling in value in less than a year.
Monzo has never had fixed overdraft fees, and can still charge a daily % interest rate as usual
Overdraft fees are also not their "one source of income"
"A 50p charge every day your account is overdrawn by more than £20, up to a maximum charge of £15.50 a month. No other fees, that’s it".
That sounds like a 50p a day fixed fee to me.
They can still charge a percentage, but that 50p per day (£15.50/ month)is £186pa on a potentially only £20 overdraft, I don't think they would get away with the equivalent APR.
In the context of the conversation, one current source of income was offered, so I think its reasonable at that point to label it their one source of income, other sources have been mentioned elsewhere on the thread though.
I was thinking of Starling's overdraft (similar UK bank) which is 15% APR with no fixed fee
> Stopping banks and building societies from charging higher prices for unarranged overdrafts than for arranged overdrafts.
> Banning fixed fees for borrowing through an overdraft – calling an end to fixed daily or monthly charges, and fees for having an overdraft facility.
> Requiring banks and building societies to price overdrafts by a simple annual interest rate.
I mean if you're not criminal/greedy/irresponsible.
Regulators weren't exactly breaking down their doors pre crash. I don't believe anything criminal was found at Northern Rock (not sure about Lehman). Yes they probably were greedy and irresponsible, but then so was everyone else.
So are they planning on launching (their own) savings, or insurance?
Monzo offers the current account and works with other organisations to offer the savings accounts (with the same UX, in the app, just as if it were a native pot). If the ISA didn't have "provided by OakNorth" in small text next to it, the customer wouldn't know any different.
Incorrect.
>overdrafts in the UK are being restricted so be much less profitable
Incorrect, the fees are being regulated to ensure they're reasonable and customers are not being taken advantage of. There is still room to make a profit (and as the article says, they are per customer).
>I believe one of its sell points is no commission on foreign currency
I mentioned commission in relation to the marketplace concept, I am unsure why you are discussing foreign currency, it's irrelevant to the point I made.
>So are they planning on launching (their own) savings, or insurance?
They already offer savings accounts via multiple partner organisations. Unsure why you have such a fixation on bringing this entirely in house -- the bank still profits from customers using these partnered services.
Since the beginning the company has been pretty transparent and clear in that the idea is to build the best current account and make use of other providers as appropriate.
A bank takes in deposits then lends them out, when trying to understand a bank it makes sense to talk about them in those terms, because if it isn't doing those things, it is really a bank.
Monzo are currently charging 50p/day £15.50/m, £186.00pa on a £20 overdraft they seem unlikely to get away with charging the same level apr, which in turn will mean less profit.
Retail banking whilst profitable (if done right) isn't wildly profitable, so the only way to rapidly ramp overall profits is to expand the customer base very rapidly, which is difficult as each new market you enter has different regulatory setups which require time/money to adapt to.
Also customers (even in countries with good bank transfer laws) are not that mobile in their banking requirements (in many cases), so growing quickly enough can be tricky.
- Partnership/Affiliate revenue by way of their "marketplace" initiatives. They get a cut of recommending services for customers. Recent examples include new utility (electricity) providers. [2] Also interest/savings accounts. [3]
- Monzo Plus - "premium" banking features such as virtual cards, metal cards, access to a curated "cheaper" market place [4]
- Monzo Business - business banking, initially focused on small - medium sized business with invoicing, payment and tax management built in [5]
- core lending as other customers have pointed out
[1]: https://monzo.com/annual-report/2018/ [2]: https://monzo.com/blog/2017/09/21/testing-energy-partnership... https://monzo.com/blog/2017/11/16/monzo-marketplace/ [3]: https://monzo.com/blog/2018/11/01/savings-pots/ https://monzo.com/blog/2019/05/02/shawbrook-savings-pots/ [4]: https://monzo.com/plus/ [5]: https://monzo.com/business/ https://monzo.com/blog/2019/06/24/business-banking-update/
There are tons of product they can come up with, like insurance, mortgage etc. So making money won’t be a problem with this growth rate I believe.
Monzo also have more customers than banks like Metro, which was older and more invested than Monzo at the time.
we're currently making money from interest charged on loans that we make to our customers, from interest that the central bank pays us on our deposits, as well as from interchange that we earn when our cards are used. this is what most banks do (except they also make lots of money from fees that we don't have)
there are several other ways we'll make money and we just started experimenting with a few of them. we launched a premium account that charges a monthly fee [1], we operate a savings marketplace in which we earn a commission [2] and we help people switch their bills to a cheaper provider if they are currently overpaying [3]
we release our financial statements every year and new ones are coming out soon. feel free to have a dig then :)
[2] https://monzo.com/features/savings/
[3] https://monzo.com/blog/2019/05/08/switch-energy-supplier-thr...
Are your financial reports a legal requirement or part of a more open business approach.
Anyway its good that you feel you're earning 'enough' money from your current activities.
On another note, I love monzo and do use it, and don't want to offend but I just had a look at the monzo plus offering and it's a bit crap. A different colour card and (later this year, and not specified) interest on your account?
A soft launch is a better idea compared to other companies launching new premium products, like the CityMapper Travel Pass, which is more like an Alpha than anything, and there have been lots of issues from the get-go.
Maybe it's the "you can't possibly trust a bank that's not even profitable" despite all the effort of cutting costs, e.g. no walk-in offices and so on. That, coupled with being "ethical" as a selling point somehow doesn't sound great in the context of banking.
You buy a beneficial interest in a fraction of an allotment of shares owned by a crowdfunding platform through the Monzo app.
What's the state of account switching in the US? I'd have thought a big part of Monzo's strength in the UK is the mandated account switching service:
https://www.currentaccountswitch.co.uk/
Is there an equivalent system in the US to reduce the friction of switching banks?
But I don't think this is crucial. We had around 5,500 switches via the Current Account Switch Service in May, but added around 200,000 new customers.
Great job again, and as I say, can't wait for the fully fleshed out marketplace.
I think the justification for only providing switch and close was that it was the only way to reliably avoid double payments IIRC. Personally I would have taken that risk and resolved them manually if necessary.
India also has other things which is driving digital payment adoption, Aadhar based KYC system, UPI payment interoperability system. Google Pay, PhonePe, Amazon Pay and many other payment apps are now bringing payment to the masses.
and suddenly we realise, India leapfrogged many developed nations in the process
I could see something like Monzo making it big in India, being an Indian living in the UK.
As a product, I find Revolut to be much better thought-out offering for both, private customers[1] and businesses[2], but as a company I trust Monzo a way more.
At least in terms of the population, the EU market is 60% larger than the US, and Europeans are already used to paying for everything with debit cards.
Also, in many EU countries people rarely do chargebacks or expect them to succeed, which makes supporting them much easier.
I'd argue the other side and say the EU isn't a single market when it comes to payment and banking culture. I'd also argue that there are large swathes of Europe that still don't have a card culture.
My personal anecdata on chargebacks corroborates yours, but my own assumption is that the market for a fintech company is much larger in the States than in continental Europe.
To my experience, even the smallest shops in most of Europe accept contactless payments, whereas in the States the smaller ones did not accept card payments for purchases under 2 (or sometimes even 20) dollars. I'd agree that the market for a fintech company in the States is much larger, but this is solely because its current state is so bad.
[0] this is a bigger thing than you'd expect and goes back to my point on culture - unless you want to feel like a tourist standing out, there's plenty of places in Europe still where cash is very definitely implied to be preferred. And don't even try if you're not in a major metro area.
"We can just throw away your money and you have no recourse, trust us with your ~banking~ beyond banking"
Revolut started out as a "prepaid debit card for paying abroad", not as "your main bank acccount", but is closing the gap quickly and should soon switch over its customers to an EU-licensed bank entity.
I find Revolut to be better than Monzo in terms of features and costs, but it's not suitable to be used as the main bank account yet because of the lack of protection.
False. Monzo's ATM fee is 3%, Revolut's 2%. Monzo gives MasterCard's exchange rate, Revolut gives real exchange rate.
If you take out at least 600 EUR / GBP monthly, the Revolut Metal subscription with all the benefits becomes essentially free.
Also, note that there are already zero ATM fees in the UK, Monzo does £200 of fee-free foreign withdrawals/month in line with the Revolut free account, and cashback is only 1% outside of Europe, if you are paying for the most expensive account. This is kind of what I mean – the offering seems to suffer from the same problems as older banks, in that it kinda looks good on the surface but mostly comes with a bunch of stuff I have zero interest in.
That makes a big difference, and it's not the case in continental Europe. Monzo then seems to be optimized for a single market and a single type of user (who doesn't travel much). I totally understand your case now.
> and don't need virtual cards
Are you using the same physical debit / credit card for all online payments? I don't see how disposable virtual cards is not the best solution for private and secure online transactions at the moment.
Ironically, the only European country where I ever even see some ATMs with fees, at all, is the UK.
Monzo has no surcharge over the network fee for foreign currency transactions, so it’s quite good. However, it’s a debit card, and credit cards still win for reliability when renting cars or buying airplane tickets.
When it comes to virtual cards: it’s a matter of taste. Personally I don’t care a single iota if my card gets defrauded; issue a chargeback, get a new one, done. Not worth giving up for the convenience of auto fill of C.C. in the browser.
At least in my EU country, every bank charges 2% (min. 2.9€) for using any local or foreign ATM that doesn't belong to its own network.
With Monzo, taking out 1000€ from any ATM in continental Europe costs 30€. With Revolut it's 20€. The difference alone buys one a Premium subscription at Revolut.
I don't have any real use-case for virtual cards, since both card provider and service provider still get to track everything. It's possible that it might be valuable to limit the amount that can be charged by a provider, or to allow a virtual card to be independently disabled in case of fraud, but I'm not particularly concerned about those given the ease of reclaiming funds generally.
No. There are fees for withdrawing cash over £200, but not using the card abroad.
If you don't mind using a debit card abroad though, Monzo gives you a good rate, not sure why you'd need to use a credit card.
Monzo's approach, if they are to be believed, is to try to make charges cover their costs but be small, fair and simple.
Revolut broke even on monthly bases in December 2017[1], and Monzo was still loosing money in April 2019[2].
[1] https://www.reuters.com/article/us-fintech-revolut/fintech-r...
[2] https://metro.co.uk/2019/04/08/monzo-set-100m-funding-despit...
What's your reason for such inaccurate information?
It reported an operating loss for 2017, because it stopped losing money on monthly basis only in December 2017.
What are you talking about? That's gibberish. It lost about £15million in 2017
If a company was losing money for the first 11 months out of 12, that's an expected result.
I dunno what you think you are trying to achieve. Revolut is not profitable
No it doesn't
So you need to spend £15k a month to recoup your monthly fee.
Natwrst have more generous cashback for their bill payments scheme alone.
Except the weekend. Gotta read fine prints.
> up to 1% cashback on all card payments.
Except in Europe, its market.
Bunq also has an impressively good API. Way more things to do than with Monzo or Revolut.
I find Bunq to be pretty unique. The entire product seems to be design by a hacker who loves to think in numbers: "3 beautiful cards of your choice", "25 bunq bank accounts", "10 ATM cash withdrawals per month". Everything is simple and clear, but also a bit overwhelming. I think it's #1 European challenger bank for technically-minded people with no-nonsense attitude, but other mobile-first banks seem to require a bit less mental overhead and are more intuitive to use for an average person.
As opposed to handling their finances on a website, like people have been doing for the past decade? Even the smallest credit unions have apps these days. What is "fintech" about this?
> The branchless bank is now making £4 on each customer it signs up to the platform, versus a £15 loss per customer last year, according to a company spokesperson.
Where's the GBP 2.5 billion valuation coming from then? There's not much detail at all in the article. I don't want to default to cynicism, but this seems like a company whose profile fits the current SV hype train, puffing up valuations and eventually taking the company public, all before a single penny of profit has been made.
1. Having better technical capabilities than traditional banks (they have apps, but they're usually limited and clunky).
2. Not having physical branches, and the associated costs.
> One reason that led Y Combinator to invest, Hariharan said, “was the traction with which they hit 2 million users in the U.K., with engagement metrics that almost look like a social network.”
It's a bank app. I can't speak for most people, but I don't open my bank app more than a couple of times a month; it's to pay my CC bill, and to make the occasional bank to bank transfer. If I'm spending a lot of time in the app, I'm probably encountering a problem of some kind.
I also can't link "app engagement" with revenue. Banks make money on mortgages, lines of credit and other financial products. I suppose daily logins allow them to advertise this heavily (my bank does it too, and I hate it), but to draw a line from A to B is a bit of a stretch.
Most people in the UK don't put regular spending on a Credit Card. Nearly everyone will use their Debit Card for day to day spending.
A lot of the traction it has got has been with the 18-30 age bracket who are wanting better budgeting tools than what larger banks have offered.
How much did my London Underground yesterday actually cost.
Send a Monzo request to a friend who said he'd pay for a taxi ride (he also has monzo, so I can just select his name and the amount, and all he has to do is press 'yes' when it pops up).
Check how much of my discretionary budget I had left to decide whether or not to buy a game.
Pay the window cleaner (bank transfer).