Metrobank account shall remain open then
Metrobank account shall remain open then
The charge is not ‘income’ for Monzo.
As has already been pointed out, the cheque address wasn’t always a freepost address, so there’s a concrete example right there of Monzo being able to make positive changes after assessing actual usage.
How is it not “income”?
The charge for this to monzo wont be exactly £1 for each use it will be less and this has been acknowledged earlier in the thread. This was a top level marker
It’s actually not far off and there’s more than one cost involved. Depending on usage it’s still possible that we’d make a small loss, but rounding to £1 is better than having, for example, a £1.10 charge that makes it an exact break even across the board. We certainly wouldn’t make any money on this.
More news tomorrow, I believe
Looking forward to hearing more. Hopefully including some of the background about why the solution works the way it does and rationale for the charge.
Thanks for your comments and feedback! I’m one of the people involved in building cash deposits - I’d like to confirm a few things people have been speculating about and some details that we haven’t announced yet.
Having read through this thread, I’d like to offer some insight into how we’ve made these decisions.
Why PayPoint and not the Post Office?
I mention this first, as the answer to this gives some important context for later points. Essentially, it was a better option in almost every regard.
One major blocker for the Post Office is that it will require us to update our chip profile – a change that we can only do by physically replacing everybody’s cards.
PayPoint have approximately 29k locations spread across the UK. Even the village in Scotland where I grew up has one! I learned where the Scilly isles were the other day when I used our internal merchant tool to plot all the locations (see below), and zoomed in on a mysterious dot in the sea. There are far more PayPoints than there are Post Offices, and the convenience stores hosting them are often open late.
Your milage may vary on this point, but in my experience using a PayPoint would be far more convenient than a Post Office – there’s one in a little shop that I walk past on the way to work every day, which is open far later than the Post Office is. I’m unlikely to have to wait to be served, and I’m probably in there a couple of times a week anyway.
We aren’t ruling out the Post Office forever – we’re likely to eventually incorporate both the Post Office and PayPoint.
Why are we charging?
As some people pointed out, lots of other banks don’t charge a fee for depositing cash. They usually do this by making up the money elsewhere instead. But we don’t think it’s right to ask everyone to subsidise a feature which we only expect some people to use.
We could try to absorb the cost ourselves, but we don’t think that’s sustainable for us as a business. We’ve just raised money and we’re working hard to become profitable on a unit economic basis, then overall. So we don’t want to add extra costs that scale with customers.
You should launch this for free and then charge if you have to / Launching this with the fee from day one is likely to give you skewed usage statistics
We didn’t want to launch cash deposits for free, then introduce a fee if we needed to. When we’ve done this in the past (like with cash withdrawals abroad) we’ve found it can be confusing for customers and feel unfair.
Instead, we’ll regularly review how people are using the feature, and work out whether we can reduce or remove the fee. The fee for cash deposits isn’t set in stone, and we’re definitely not ruling out the possibility of making them free in future.
Launching this with a fee will change the usage pattern when compared to free deposits. That’s unavoidable, but having some data is better than having no data. If we’re unhappy with the quality of the conclusions we draw from the data in a few months time, then we can run some different trials / experiments and compare the datasets.
Make the first one free / Make it work like international ATM withdrawal fees
We explored this option, but ruled it out as we couldn’t make the numbers work. We built a model comparing different “first one’s free” approaches, but for each one you’d need a significant number of people depositing cash at least once a week in order to balance out the cost of the “free” deposit. Again, we thought it would be fairer to pass on the costs to everyone who uses the feature, than only charge the group of customers who use it more than once.
We populated this model with data from a survey we conducted several months ago. It gave us some idea of how often people want to deposit cash, and how much. It didn’t take into account the convenience factor of using PayPoint (i.e. you’re more likely to do it because it’s right there, vs going to a bank branch).
A “first one’s free” approach is also complicated to explain and understand. Our customer support team fields about 10 questions a day about how international ATM fees work. A free cash deposit in a given period is probably easier to explain than ATM fees, but in our experience conveying information like that succinctly and correctly is difficult.
I wouldn’t use this to pay in small amounts of change because of the charge
The convenience of PayPoint would naturally lead to people making more cash deposits through Monzo, compared with how many they do with their bricks-and-mortar bank right now. For many people it’d be so much easier to deposit amounts they wouldn’t have bothered with before. Without the fee, I would personally be quite likely to deposit money to get rid of change if I was in my local corner shop.
Unfortunately, we can’t absorb the cost of this kind of usage. Peter’s post earlier was absolutely on the nose about this.
£1 is expensive for individuals with lower income / It doesn’t work well for people who rely on cash / This isn’t “making money work for everyone”
We’re adding a feature which we previously weren’t able to offer. As a result, some people will be able to get more out of Monzo than they could before, which we hope makes their money work better for them.
As I’ve said above – we’ll review the fee once we have more data. Making money work for everyone is an ongoing process!
Monzo is charging people for putting money into their account, money Monzo will then profit from
We would earn money on these deposits through two channels:
Assuming we made cash deposits free, if you were to deposit £100 in cash and leave it in your account it would take more than a year for Monzo to make back the cost of the deposit. If you were to deposit £100 and then immediately spend it we would make a loss. In fact, it’s impossible for us to break even using interchange alone – if you spend £300 via a normal debit card purchase we would earn 60p. We would just about break even on a free £300 deposit if it stayed in the account for two months and you then spent it as part of a normal card payment.
Why are the limits so low?
Cash deposits represent a very high risk of money laundering. A number of details of our implementation with PayPoint mitigate this, but from the result of our surveys indicated that a limit of £1,000 over six months would cover the vast majority of use cases.
The responses to our survey question “Why do you tend to need to make cash deposits?” had the clear winner of “gifts”, with “cash sales” coming up in second place with half the votes. We especially want to cater to the first use case, and think these limits should work for most people.
Again, we’ll review these limits once we have more data on how people use the feature.
Amazing. Thanks for such a detailed post explaining your reasoning. Fantastic to see the thinking and process that’s gone into this.
Thanks for taking the time to explain this all.
It’s not a feature I think I’ll need but I understand that for some it’s critical.
Amazing write up!! Love the amount of detail, it was an interesting read
I fall under the 2 most popular categories of cash deposit reasons Money received for Christmas & Birthday’s plus the maybe one cash sale per year (the Google phone from the previous year )
The £1 transaction is perfectly reasonable in exchange for the convenience that Monzo provide by offering us the option to use PayPoint (remember, it’s an optional thing depositing cash , nobody’s forcing us to deposit with Monzo )
I’m looking forward to seeing the feature pop up inside the app and reading a great blog post on the full announcement!
Whilst I don’t agree with it I fully appreciate the time and thought that’s gone into this decision and the lengthy explanation.
Lets hope the revisit is as transparent in a few months as this writeup is here in terms of usages and actual costs etc.
Personally I wont be using the feature and will continue to use my legacy bank for all cash deposits as i have been doing.
£1 isn’t a lot of money, at all, but I feel like a fee for depositing cash really isn’t the way forward. #myTwoCents
Alongside that the limits seem really restrictive and way to low… Lets say you privately sell an old car to random Joe off the street for £2,500 cash or something, this doesn’t really help at all - I get that it covers a lot of bases for “normal” day to day use… But doesn’t help at all with those larger things, sadly another reason to have to keep a legacy bank account open for those “just in cases”
Firstly… Epic response - I’m sure people will disagree (I do in parts), but the detail and thought that went into it was very good - Bravo sir!
I could try and work it out based on your comments, but are Monzo prepared to say exactly how much it does cost when a customer deposits cash? Also, Is it a % of the fee deposited, or a flat rate?
I definitely think there is a whole shift in mindset that is needed for the majority of people to see this as a positive (despite it being an “extra” service that Monzo previously didn’t offer at all).
10 years ago, free banking and having 1 current account felt like the norm, and to a lot of people (outside of the fintech bubble), it still feels like the norm.
So to effectively need to get your head around fees for “basic” services, coupled with the need for other banks to service your needs, will definitely take some time for people to comprehend.
It’s not a service I’ll use (I despise cash), and the PayPoint/Post Office argument is irrelevant for me (the only 2 locations of each within a 10 mile radius of my house are both PayPoint and Post Offices!) - But I can understand why PayPoint might be more attractive to some.
It’ll be interesting to see what the take up of the cash deposits are, and whether Monzo decide to change/remove the fee in future.
Either way, thank you again for the insight.
This is based on a hunch, not on any facts or inside knowledge If ‘Joe’ does sell his car for £2.5k and only had a Monzo account… Then I would suggest that they contact Monzo Under specific scenarios, Monzo can increase payment limits for buying cars (for instance) so I’m sure there’s at least the possibility that they could do the same for cash deposits, albeit at a greater fee (I would assume)
I agree with this, I have an account as a ‘just in case’ / backup
Surely this person would have to go into the bank to get that much cash in the first place, and nowadays it would be much easier to just do a bank transfer between the two of you? I know thats what I did when I bought a car for 900 a few years ago.
Oh yeah, absolutely, I’d prefer a bank transfer for sure, and a trip to a bank/paypoint would be required for a cash sale either way…
The problem I’m highlighting is that limits are restrictive and you’d be stuck with £2.5k in cash and no way to pay that in unless you’re willing to split it into £1k every 180 days, with legacy brick-and-motor banks you can just go drop that full amount into your account with not many questions for smaller amounts (I believe all they do is ask where you sourced it from for certain quantities)
Firstly, excellent write up. I won’t use the deposit feature as I have other bank accounts, but I’m especially pleased at the notification workflow.
Now the awkward question:
It’s interesting to compare the policy to charge for ‘Pay–as–you–use’ debit card top–ups (“Absolutely no”) to ‘Pay–as–you–use’ cash deposits (“Fairer so as not have everyone subsidise a subset of users”)
I wasn’t a fan of top–ups, but some on here did say they would be willing to pay to use them. So why the difference?
Nice! There’s a fair amount of users saying that the £1 is unfair, but given the justification, and how much legacy banks charge for things that don’t cost them anything, I’m for it!
Not for International Students, for instance, they won’t. When I first came into the UK to study, many years ago, after Christmas and Easter breaks I’d always bring a stack of money to last me for the next few months that I’d deposit ASAP. £1000 is simply not enough.
As such I believe students will be put off it 1) for having to pay for it 2) for having low limits. Essentially I expect your data to be very skewed, but also I can see why you would do that - nobody likes risk
I guess I’ll keep my @firstdirect@ for the time being, their machines are convenient, free and of-high-enough-limit.
Great news! Disappointed with the limits though. £150 a month could be achieved relatively easily!
As others have said, it’s great to read such a considered response. I don’t personally agree with the decision, but not because I think you’re wrong.
Would something like foreign ATM withdrawals arguably not fall under this same category?
I can only speak for myself, but depositing money (rarely as I do) is still far for frequent for me than going abroad.