How do they make money?
They'll likely cover costs in the long term, and their business banking will probably do fine, but I suspect the valuations aren't justified. The main way that the major players make money is through things like mortgages, wealth management for the very wealthy, and through their investment banking arms.
Starling is another startup bank, a main competitor to Monzo. While they're decidedly less "cool", they seem to have targeted business banking much more, and I suspect that's why they're now in a better position. Monzo went big on Monzo Plus and even on its ~3rd? iteration, it seems to have had a lacklustre reception. I'm Monzo user #13, about as onboard with the idea as I could be, and I find it unconvincing.
Monzo have just launched Monzo Flex, an easy payment system like AfterPay/ClearPay/Klarna. I'd normally expect that to do well but it's about 2 years too late and going into a recession is probably not the right time. Hopefully it'll do well as we come out.
It's a shame because this is something that Monzo could've done just as well and there's absolutely a place (well, was - that's now taken by Starling) in the market for it. Natwest still charges extra for a "next-gen" business account that allows multi-user access to a web UI, and I bet it's terrible - this is something a company can Monzo could've built in days based on their existing modern tech at a time where there was nothing like it in the market.
Starling seem to have taken a "slow and steady wins the race" sort of approach, and had a bunch of experienced engineers build a boring old Java app. Nothing special but I'm not surprised that it is working out ok in the long run.
Having seen some presentations about their tech. stack, it seems very clever and has interesting ideas, but I was worried that once the people who designed it had moved on , how maintainable would it be (coming from a banking background where I found that systems lived on for EVAR)
Why is that? Current accounts are a loss-leader for most (all?) legacy banks too, they're used to lure the customer in so they can then pitch revenue-generating products such as credit cards or mortgages.
So I’m always surprised that lending and credit isn’t the core strategy of these banks - there’s very little money to be made in fees…
Mortgages and credit cards are the big ones, and Monzo does neither. However I would like to see a credit card from Monzo.
I think since app dominated baking became a thing a lot more people are paying for premium accounts.
Imho they all offer poor value for money though
I do wonder why the VCs wanted into this market at all
intense competition snuffed out the margins of retail banking 30 years ago
and the "legacy" (read: profitable) banks are more that capable of putting together a shiny looking app
- Packaged account fees (Monzo Plus, Premium and business Pro)
- Lending (Overdrafts, Personal Loans, Credit Card)
- Interest on bank deposits
Cash withdrawal in pounds in the UK: First £250 in a rolling 30-day period free, 3% after that
Cash deposit: £1 per deposit to pay in cash at any PayPoint
At least £500 was paid into a Monzo account in your name over the last rolling 35-day period, and you have at least one active Direct Debit on the same account in the same period.
You’ve received a Department of Work and Pensions or a Department for Communities’ payment into a Monzo account in your name over the last rolling 35-day period.
You’ve received a student loan payment into a Monzo account in your name over the last rolling 8-month period.
You’re sharing a Monzo Joint Account with someone who has done at least one of the above.
if you lose your job, you're now being charged 3% to pull your own money out
(and regardless: they still charge you to deposit your own money, unheard of for retail customers)