We are building a hub for your money, where you can visualise every aspect of your finances. We want to automatically take care of all your financial admin. For example, if you move house and need to pay council tax in your new borough, Monzo will take care of that. If you sign up for a new gas supplier and a few months later they hike their rates, we’ll be able to take care of moving you to a new supplier. By 2030, Monzo will be a control centre where you can take care of all of that.
Disaggregation of services has been happening for years so we are going to create re-aggregation through our platform. We won’t invent all of these things but we’ll list all the third parties within our platform. So, if you’re looking to invest some of your savings, we can say, here are the best savings accounts, the best Isas and the best peer-to-peer platforms where you can invest. It’s a hub-and-spoke model, where the financial product is the spoke and Monzo acts as the hub.
Yes, but if you want to be a true hub, you need to be really good at customer service, and you need a really delightful user interface that people want to use every day. Our average customer opens the app 12 times a week, which is almost twice a day. When you go onto a price comparison site, they are clunky and you have to click away from the website in most cases to complete your order. We will be a one-stop shop and won’t force users to navigate away from Monzo to complete the transaction.
Banks can look at us and absolutely are looking at us and copying features. Barclays launched ‘freeze your card’ very recently, which is fine. There is a saying in ice hockey: ‘You’ve got to skate where the puck is going’. If you skate at the puck, it will have moved so far ahead by the time you get there that you’ll have missed it. Banks are looking at us. We are the puck.
If you’re the hub, you need to have the great customer interface. If you’re the spoke, you need to offer the best price. That means having the most efficient systems and not many people and a big balance sheet. The banks are not only bad at user experience, they also have this massive overhead from their bank branches and legacy technologies, which prevent them from offering products at the cheapest price.
Banks are also stuck because they have their own products and services, which they want to sell. They don’t want to give you a better rate on your mortgage because they are already selling you a mortgage. They are in a conflicted position. If you want to be in this kind of marketplace, it’s best not to have any horse in the race. So that you can be totally impartial. It’s tricky for them because this approach would end up cutting their revenue. No bank is going to sign up for that.
“There is a saying in ice hockey: ‘You’ve got to skate where the puck is going’. If you skate at the puck, it will have moved so far ahead by the time you get there that you’ll have missed it. Banks are looking at us. We are the puck.”
For most people, their money causes them some amount of stress or anxiety. If you’re someone who lives from paycheck to paycheck, which is most people in this country, a month with five weekends is much harder than a four-weekend month because it’s easy to overspend. Most banking apps won’t tell you how much you’ve got left in real-time, so you end up overspending, cross your overdraft limit, and get whacked with charges. The experience is deeply uncomfortable for a lot of people. At Monzo, customers love the visibility and control we offer. We don’t pay interest but you will know exactly how much money you have right now, where it’s gone this month, and if you’re overspending or not. It’s not just a shiny interface.
If you talk to a rich investment banker, they don’t get it. They want their cashback and their Avios points. This is for people on a normal salary, living a normal life. Our service is relevant to 90pc of the population. It’s not for the 1pc. If you have a private bank account at Coutts, then fine, stick with it.
We get over the trust thing by starting small. We say: ‘Put £100 on your account. See how you like it. Use it to send money back and forth between friends.’ We see adoption ramp up fairly quickly. After two or three weeks they may put their whole disposable income in there. Then, after a month or two, maybe the salary. It’s a gradual adoption curve. We’re not asking people to get married on day one, just to go for a drink. We’ve taken that approach and it’s working really well for us. We’re signing up more current account customers than any bank in the UK right now, and that’s without doing any advertising.
Having a banking licence goes a long way because all customer deposits are insured. Heaven forbid we screw up; your money is safe, because the government guarantees it up to £85,000, which for most people is a lifetime of savings.
I cannot see us doing branches. Maybe we’d have a pop-up branch as a joke one year but I really think the debate is over on that one. The big banks are trying to shut their branch networks but there is political pressure to keep them open. I think they would get rid of all of them if they could. Pick your last three holidays. How many did you buy online versus in a high street travel agent? It’s not a debate we have any more.
People talk about branches being useful if you have a problem but branches are only open from 9am to 4.30pm, which happens to be when most of us are at work. All the hours where I don’t work, they are closed. With Monzo, you are able to talk to someone at 1am on a Sunday night, when you actually have a problem, and get a response then. That’s more important than having a branch on the high street — at least to our customers.
In the UK consumer space, there is only Starling and us. Brand awareness is only at 5pc so we are only getting started. Barclays, Lloyds, RBS, HSBC and Santander hold the market share. Every customer who comes to us comes from one of those banks. You have a few fintech early adopters who have a Starling card and Revolut card and a Monzo card and an N26 card but the vast majority banked with RBS for 15 years and are looking for something better.
The increased press awareness of us all helps us all, but I don’t feel like we’re in competition with each other, I think we’re in competition with RBS.
We’ve chosen the current account as our entry point. Revolut have chosen a foreign exchange card as theirs. You might start out as a Plum or Cleo or Emma, that’s a different entry point, but we’re all trying to get to the same place. You can choose a different market entry strategy but aim for the same goal. I don’t know who is going to win. Is there going to be a new model, which hasn’t been predicted yet, that happens to get mass consumer adoption, to get there faster than we would get there? I have no idea.
With this marketplace idea, in each country, one player will get the majority. Being a “hub” has a strong network effect. If all your friends are on one platform — like having to use Whatsapp or Facebook Messenger — the network effect will out.
Some of the current banks will go bankrupt, I think. By 2030, perhaps it’s Monzo plus two or three incumbents providing the hub. Then as spokes, you’ve got the specialist banks, like Aldermore, Paragon, Oaknorth and Shawbrook, who all do one thing really really well. Similarly, other spokes might be TransferWise doing the currency exchange and Zopa or Ratesetter doing peer-to-peer lending. If you are a big balance sheet selling mortgages, you’re a spoke plugging into a hub. I don’t think 20 hubs can succeed.
Monzo is currently an improvement on the current account model of banking — not yet a disruption of that model. Nonetheless, it’s an improvement that’s helped us get more than half a million customers without paying for advertising. It has been pretty painstaking and expensive, getting a banking license and building a bank from scratch but we’re there now, and it’s validated our approach to some extent. We’ll pass 1 million customers this year. Do I worry that there may be a cheaper and faster approach to get to 10m customers? Maybe. That’s what is in the back of my mind. If we’re the MySpace doing pretty well, is there a Facebook coming that we haven’t seen? It’s impossible to know, you just have to see how it plays out.
An interesting model is WeChat in China. People who didn’t have a bank account in China could go to WeChat and suddenly get access to all these financial services. As a model that’s super interesting. I don’t know whether that plays out the same way in Europe. Be interesting to watch.
We’ve had a bunch of offers from banks and other industry players. But Monzo is a product I would like to use and I would like my friends and family to use and I think that the average person on the street would really benefit from. If I spend the next 15 years building that, what an amazing way to spend my time. Selling to a bank would be a sure-fire guarantee that we would not get there. Never say never. Something might go wrong and we might end up selling. But that is not the goal.