I concur with your thinking on this completely.
As someone who has followed Monzo since early 2016, my feeling is that Monzo wanted a banking license because they had big ambitions and knew that being a “proper bank” was going to be important from a customer trust and regulatory confidence perspective. It also ensured positive press for Monzo, rather than dismissive “warning” articles about how your money wouldn’t be FSCS protected. So in that sense becoming a bank did work.
They then wanted to push the message that they were “a different kind of bank that lives on your phone”. This can be summed up in the idealism you referred to. But it seems that they were slightly naive as they did not realise the level of expectations that customers would then have of a “bank”. Chiefly, easy access to customer service through multiple channels and the ability to deal with cash and cheques for free.
It seemed, to put it frankly, that the reality of the market had shattered the bubble of the bank’s original vision. I’ve said before that the typical Monzonaut probably lives in London, lives a stereotypical “urban professional” lifestyle, rarely or never uses cash, and is financially comfortable enough that a “simple, small fee” of £1 or so for features seems like nothing to them. Ditto paying for Monzo Plus or Premium. This is not so for the majority of the population, or even the majority of Monzo’s customers.
Monzo’s leadership has realised this, I think, and is now starting to refocus on profitability but also continuing to grow the bank’s appeal and attempting to get back to the levels of customer growth we saw in the past. Hopefully this means the future is bright.
I just hope that history doesn’t repeat itself and Monzo misjudge a market again, as I believe that their US venture is doomed if they do not bring out full support for cheques over there. That could spell trouble for the entire company if it goes wrong, so I am sure they will be looking carefully at how best to position the product.