Come to Monzo HQ to talk about Overdrafts 😄

I am going to take a unpopular view but you know it is what it is.

I don’t think we should pay anything for an overdraft. Why? Simple we won’t be paid (interest) on our credit balances so what is the banks money worth more then anybody else’s money? It’s only fair that if you don’t pay us we don’t pay you.

Remember the banks earn money from playing with/trading with our money on the money markets during the night so I think that’s compensation enough.

In saying that the less evil of the two if pushed, is paying debit interest as long as it’s not anything too crazy noting the above.

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Not unpopular - just a different point of view

why would you want an overdraft if “we” have a credit balance :slight_smile:

If you (?) want Monzo to be a facilitator for you (?) to borrow somebody elses money - they are providing a service to enable you (?) to borrow money from me (?) - I am very happy to have Monzo provide a service that is free - to me - and I don’t mind them using my (? ) money to lend it to you (?) to help you (?) out - for a price that enables them to run a business that provides my service - Monzo would like some reward to enable them to keep giving me the service that I want without a charge to me, pay their rent , pay their wages and make a profit ( in other words a business :slight_smile: )

  • nowt in life is free - I am willing to accept them lending you (?) my money for the service they provide to me at no charge with no recompense to myself for using my £103.63 as long as there is no restriction from Monzo on me drawing out my £103.63 when I want it - now if I want to tie up my £103.63 for a fixed time maybe I would expect some kick back in interest
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Not an unpopular view but an impractical one. Monzo is a bank not a charity or non-profit organization, it needs to generate income to cover staffing costs, introduction of new products, app development, card issuance and distribition, later international expansion, etc.
Unless you know some fairies or a tree that grows money on, I think Monzo’s longstanding plan to cover costs thru overdraft provision is a sensible route to take.
Unlike huge mega banks they do not have other sources of funds or old branches to sell off.
Overdraft interest or charges are a certainty.

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A credit balance does not prevent you from having a overdraft facility so I really don’t know where you was going with that. Just remember my money (if I had a savings account) would also be used to lead others money.

So in your case you are happy with them using your money to help fund other people, on a short term basis (though it’s normally via savings accounts) which I am not sure Monzo will be offering but I digress.

Yes they do take some risk in offering credit but like I said they make money on our money during the nights, which is all very good. To offer no credit interest on credit balances (please note this is not just a Monzo only problem as almost all banks are doing this a standard now) is a bit cheap.

Hmmmmm reads it again So as you put it there are no such things as money trees fine. So you are happy for them to make money off your money and give you no credit (interest) for it. Surely you would want your money to work as hard for you as it possibly can as money does not grow on trees.

Maybe your views are slightly different then mine as you are an investor.

Look businesses should make money so your quip about Monzo not being a charity was a great soundbite but offered absolutely nothing to the conversation, as we joined Monzo fully knowing that anyway.

Monzo does not have bank branches to sell off but that means they are a low cost operation. Which means they have less overheads. So just like you are arguing it one way I can just as successfully argue it the other.

I have thought of a halfway house. Want a overdraft then forgo credit on your credit balances or have slightly less. If not then you should have credit interest as a matter of course.

When Monzo offer you an overdraft they take a risk (& lose some of that money, due to bad debts), while providing you with a valuable service. So you are paying to cover the losses & use the service - but if you don’t want an overdraft, you don’t have to take one.

They’re not earning significant amounts of money in other ways - medium / high return investment, mortgages, business loans etc. which the other banks do.
Since the overdrafts, which are their only significant revenue stream, will only cover their costs, it would be risky / foolish to use them to fund interest payments on deposits.

But users who want to earn interest on their in credit balance will be able to transfer & manage it via Monzo’s API & marketplace. So they’ll have easy access to a Moneybox ISA or P2P lending service provider.

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I know banks offer an overdraft subject to internal credit scoring.

Yes and I also know that it’s one of the few ways Monzo plans to make a profit.

I also can counter what you are saying, by saying yes they don’t have to earn loads of money, like the high street banks.They don’t have the high street presence or the staff or the huge insurance bills to insure the above.

So it’s really horses for courses.

Am I anti Monzo making money? No of course not. Not offering interest on credit balances is not just a Monzo thing as almost all banks do the same thing.

People are arguing it like it’s Monzo one and only revenue stream. Surprise! It’s not. However it’s one of the most lucrative depending on what/how they charge but we will see in due course.

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I have a feeling the investors would disagree with you.

But either way, it looks like you might have missed this -

Could you break that down for me? I’d be fascinated to hear your insights on these other revenue streams.

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Lol you want me to explain Mondo’s additional revenue streams? Hmmmm whatever way you look at it that’s not good. I’ll be nice and offer you just 1. Keeping the credit interest for themselves. Maybe that’s too simplistic? I’ll try another one. Are they not thinking of charging for faster delivery for lost of stolen cards? If I have to tell you all of the above then like I said above that’s not good, as I thought you would be on top of things like this. I guess not.

Like I said at the end of my last post it’s potentially the most lucrative charge.

It costs Monzo about £50 per year to provide you with a current account. The costs come from producing the plastic debit card, posting it out to you, making a card transaction, providing customer support 24/7. That’s before the salaries of programmers, designers, office rent, etc etc.

If you have an average balance in your account of £2000, Monzo would earn £5 a year from that money by sticking it in the Bank of England (at 0.25% base rate). So unless you have huge amounts of deposits (ie £20k per person) sitting in your current account, we need to find an additional £45 per customer just to break even (not even make any profit).

The average high-street bank earns about £120 per account per year, and about half of that comes from hidden fees and charges. Things like penalty fees for rejecting unpaid direct debits, and unauthorised overdraft fees. We don’t have any of those fees.

We could offer interest-free overdrafts, but then costs would need to be covered some other way. Maybe a £5-10 monthly fee. But I suspect most people wouldn’t want that.

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Hi Tom, nice to have you on here. How much roughly does a bank earn by playing the money markets in the nights with our money? That might go a little bit to reduce that £45.00 I guess?

Not many people know about the market markets as it’s not so much a secret but it’s on a need to know basis.

Banks need to post and produce debit cards once for what every 2 years on average. (lost and stolen cards) as they are normally valid for 4 years or there abouts.

I’m not an investor :slight_smile: but I do know enough about Monzo to know that they won’t be investing in the ‘money markets’ - see the link in my first post in this thread.

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I’ve amended the above. :slight_smile:

lol " It’s only fair that if you don’t pay us we don’t pay you. " - guess you won’t be getting a 2nd overdraft from Monzo then :slight_smile:

Why would I need a 2nd overdraft? 1 is enough.

but you won’t be paying for it because its not fair that they charge you for the facility - so why should they give you another one after the first default :slight_smile:

Can’t seem to find it.

What? If there is no fees then there are no charges which means as long as you don’t go over (and even if you did no charges would be applied anyway.) Hmmmm the perfect bank! Lol it would not last long but you know.

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Actually most banks don’t or it takes a long time before they would even think about entertaining you regarding credit.

It’s explained here https://monzo.com/ethics/

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