Bank charges: Monzo vs High Street Banks

One of the biggest selling points for getting a monzo card is Monzo’s promise not to charge fees for declined direct debit, cash withdrawals, and payments using the card.

I’m curious to know how monzo are able to do this.

As someone who works in an industry where fees are charged in part to cover the cost of something, and in part to provide profit to the company, I can’t figure out how Monzo are able to not charge fees.

For example, I mainly bank with nationwide, who recently charged me £15 for not having enough money in my account to cover a standing order.

Open for irony

The irony being that if the standing order had been paid it would have put me £2 into my non existent overdraft for this particular account, so they didn’t pay it. But they still charged me the £15 fee, putting me £13 into my non existent overdraft. Because…. Logic?

This means we can assume one of three things:

  1. Me defaulting on a standing order causes Nationwide to incur a charge to the tune of £15, which they pass on to me. I defaulted, so I pay the cost. Simples.

  2. Me defaulting doesn’t cost Nationwide a single penny, but they charge me £15 to teach me a lesson, and pocket the charge for their Christmas Party fund.

  3. Me defaulting costs somewhere between £0 and £15 and Nationwide charge £15 for both of the above combined

Regardless of which of the above is actually true, it is obvious that high street banks charge fees as a combination of covering costs and making profit. But Monzo don’t do this.

TL;DR: How do Monzo cover their costs and make profit?

P. S. Absolutely not knocking the whole not charging fees thing. It’s the best thing since this reddit feed: How would you update the idiom “Greatest thing since sliced bread?”

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I don’t know whether not paying a Standing Order costs Nationwide money (my instinctive response is no - it would be stupid for them to incur costs for something they control) but Monzo doesn’t need to make money through those sorts of charges & doesn’t want to because users hate them.

Tom commented recently on how simple it is to reject a scheduled payment &’s very simple, for a bank that’s built using a modern technology stack at least.

Instead, here’s my summary of how they’ll make money - it’s amazing what you can do with a much lower cost base -

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Don’t forget that High Street Banks have to cover all the costs of running branches, including all those ones in tiny towns that get approximately 2 people going in per day! :wink:


An excellent, and obvious, point that I had missed! Quite obviously a few savings there.

interesting old article from Starling (who will be running virtually the same business model as Monzo) includes a question 1/2 way through article on how banks make money

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