I was invited in for user testing last week. Overdrafts offered to those eligible as they begin to run out of funds via a realtime notification. Proposal is that overdrafts of up to £1,000 max will be available to start with (subject to a credit check), the first £20 would be free, thereafter the cost would be 50p per day regardless of amount ie any amount between £20.01 or £1,000.
No mention of interest rate / EAR etc for comparison purposes in the UX I saw (perhaps this is possible given there is no interest being charged, only fees, but I thought it was a regulatory requirement regardless).
Going to be a divisive product in my mind, on the basis that (1) if you need to borrrow £25 you might as well borrow £1,000 because it will cost you the same each day (which is encouraging people into greater debt) and (2) 50p per day for relatively small amounts is more expensive than payday lending (which is legally capped at 0.8% a day) - and this for an authorised bank overdraft.
Somewhat at odds with previous comments from @paul when he wrote a blog on this subject, who was talking about unauthorised overdraft:
Over the past few years many banks seem to have concluded that their customers don’t understand percentages, and so they charge 50p or £1 per day for going overdrawn. You do the maths! I reckon that’s more like 200-400% in terms of interest. And I thought payday lending was supposed to be expensive…
Personally I think it’s disappointing for Monzo to take a lowest common denominator approach on this, perpeptuating the injustice of UK current accounts: those that struggle in the red will be subsidising free accounts for those In the black to a disproportionate degree.