Competitor update

( related to Monzo CEO, Investor in Monzo ) #92

devil take the hindmost ?


Ive been using the monzo app a couple of weeks now and find it very interesting. A good product but I do wonder what the plan is for this to be a money maker for the owners. I also wonder the reaction of the community when this happens. Will there be a subscription to be paid like most banks do for their current account or are you thinking of making the money off fees? Whilst I expect when people say “monzo is different” they mean “its free and innovative” you guys have to make money some how else who will invest?

I havent seen anything mentioned about starlings charges yet, but I assume their current account will be here by 1st quarter next year so the question I guess goes the same for those too. Tandem are going with a credit card so I assume they will make their money from interest and charges but will need to hold a lot of capital to do so. I think whilst Atoms app is really marmite they seem to be aiming for a typical banking model, which is why I guess they still find it so easy to raise capital. Savings in and money out through mortgages looks to be their first strategy. Does that look like they are actually playing a long game and everyone else has naively gone for the most audience pleasing products first but potentially will get swamped by the need for capital in their banks to support a loss making current account?

Its all quite confusing and I’m sure everyone has a long term plan they are selling investors.


Monzo when Mondo did go into detail about their planned revenue stream they seemed to be dependent on income from overdrafts

(Alex Sherwood) #95

As Richard says, the first :mondo: product will be overdrafts which have been described in some more detail here

& here

Monzo are asking for feedback about how the overdrafts should work here

it seems that Monzo’s business model is reliant on the fees from overdrafts, as Tom has specifically said that

The idea of one bank providing every service (mortgages, credit cards, p2p lending etc.) is no longer credible

Since Monzo will have an open API, the hope is that developers will be integrations which will create an ecosystem of value added services which is partly what will set Monzo apart from competitors. Tom’s described some of those integrations in this video.

The challenge that competitors like Atom have is that they are building services on top of legacy banking infrastructure with all of the limitations that result (Tom also talks about those in the above video).

Starling seems like the most similar company to Monzo, Tom & a few employees actually left Starling to found Monzo but they’re much more secretive so we don’t know as much about their product.

In any case, it’s very early days for all of these companies.

I’d recommend checking out the article that I’ve posted in the above thread from Bloomberg, as it gives a really good overview of the current state of the entire ecosystem of fintech banks in the UK.


Thanks for the links. The interesting part for me is that monzo is aiming to be transparent. In some cases do you think that transparency could lead to not actually making anthing from an overdraft? There’s lots of goals, spend categories, graphing, alerts and in general ideas coming out to help us manage our money. Does that contend with the money maker (overdrafts). If I know my spending is too high I’ll slow down to ensure I don’t hit my overdraft as that just means more negative balance in the long run.

I think my point here is if monzo becomes so transparent and clever in the app will it be able to make enough from overdrafts? A few friends with monzo cards use it specifically because they can budget better than in their fully fledged current account. That behaviour to an extent is not what you typically would like if overdrafts are what allows the company to pay the wages of its staff. There’s a bunch of stuff monzo has to pay for on top of all of that too like card production, Apple pay, atm network charges (viewing balance is charged for)

Personally if the product is good I would go for subscription model. Pay more for the better features even.

I read the ft article. The stats make sense. Thereq is definitely something unsexy about a savings account as being your only product. I wouldn’t use the figures as an atom vs monzo who is better personally it’s apples and oranges. I have a monzo account but care little for an atom savings account in this market. However atom have the stickier money to lend out at will to businesses and personal mortgages. I guess their deposit balance is more usable right now. But totally different strategies here.

(Alex Sherwood) #97

I understand what you’re saying there, it seems like there’s a bit of a conflict of interest for Monzo who want to earn revenue from overdrafts but are providing tools so that we can manage our money & don’t need to use one.

In reality, even with the best tools, Monzo is still going to have plenty of users who need an overdraft -

So the question is, what are the benefits of providing these features to users & do they still help Monzo earn revenue? There’s several ways that they do -

  • Providing superior features vs the banks is what draws customers to Monzo in the first place. Specifically the unique features like the ability to freeze & unfreeze your card and the instant transaction notifications, with a live balance, among others.
  • I might be reading too far into this but the targets functionality appears to have been carefully designed to primarily draw the user’s attention to how much they have left in their account & then realise “I don’t have enough to get me to the end of the month”, at which point, the app has probably spotted that too (see the balance projection in the pulse graph) and has offered them an overdraft, which the user’s more likely to accept.

Whereas standard approach to budgets is to show the user that they’ve spent x out of their total budget so they’re more focused on how much they’ve spent, rather than how much they have left (even though the former is clearly displayed in the app too).

So the design of the app plays an important role here.

There isn’t another bank (as far as I’m aware) that provides accurate, easy to manage categorization which feeds through to targets (the categories do need some attention but that’s on it’s way). So if you’re serious about managing your money, Monzo is a pretty good option.

By themselves, savings pots aren’t groundbreaking, all banks allow you to open as many separate savings accounts as you want online.
But linking savings pots to targets (something the banks still haven’t been able to do) so that the money you’re trying to save is deducted from your available funds for that category or the money that you’ve saved is shown in addition to your available funds (or something more clever, that I haven’t thought of), makes both features much more useful.

Once you’ve been managing your money using these features for a while, you’re less likely to be tempted away (by other service’s features anyway, obviously financial incentives are still a significant factor).

The last thing to bear in mind here is that Monzo’s overheads are much smaller than a traditional bank’s (I’m paraphrasing a quote from Tom there, that I can’t find anymore).
In 2014 Barclays spent 3 billion pounds on tech…they obviously make a lot more money than Monzo too (in a good year). But because Monzo doesn’t have to maintain the massive amount of the infrastructure that’s required to run a legacy banking system, it’s cost base is much lower. So it doesn’t need to make as much revenue from it’s overdrafts as a bank would have to, in order to cover it’s overheads.

Foreign Transaction Fees and the Future of Monzo
Monzo's core banking product (current account)

I see it as a good approach. Rather than just encourage lots of borrowing to make money but have some customers get out of control and default on repayment you are both offering borrowing facilities and also helping, aiding, assisting thru your app tools that client to better manage their money and control their expenditure so overall you may reduce the number of delinquent or defaulted accounts and also on a secondary or related matter if your loan book or lendings have a lower proportion of bad debts it makes the company more interesting for potential buyers or investors and if lendings are insurered then they will get a better premium with a lower bad debt level. So making money from offering loans but giving customers the tools to avoid an overdraft or minimize their overdraft seems a sound approach to me.


I wasn’t aware that they were planning to do savings accounts in the future so thanks for pointing that out. I guess the balance between the savings accounts and overdraft fees is key. In my view that almost makes the overdraft fee question even tougher than before.

I do like the goals and categorisation stuff it is very useful but I don’t think its unique to Monzo. It’s probably unique to banking apps overall which is causing the big draw right now as you say. The tech is there though and ready to be integrated and the freeze/unfreeze is as simple as changing a card status (I think monese do this right now too).

However features aside, Im still interested in the monzo proposition and how the business case stacks up. I think we have all seen how a product configuration has a bigger impact on the success of the bank than its App hint hint Atom 2.2%

Anyway I’m sure all of this is being thought of and I cant wait for the blog post to explain it all :slight_smile:

(Alex Sherwood) #100

Definitely, I’ve been harrassing Tom about it on Twitter :wink:

(the Secret Tesla Masterplan was a mix of vision statement, product strategy & business plan)

& it looked like that was on it’s way for a while

But I guess Tom’s saving this…more requests for the post / likes of Tom’s tweet can only help :raised_hands:


Atom may have been 2.2 when they launched but their rates now are 1.4-1.65 so looking less competitive

(Alex Sherwood) #102

I wouldn’t mind this either.

However I’ve been to a meetup this evening with Jonas (one of the Monzo co-founders) & he was adamant that Monzo won’t charge fees. His reasoning was that it’s much harder for banks to compete with free.

Never say never of course but I thought that was an interesting insight into the business model.


Anyone seen this? Any information? Popped up on an advert I saw on linkedin

(Aidan Lawlor) #104

Hi Munkee. Leveris is a cloud-native banking platform built from scratch. We ( I work here) have built the whole stack. Back, Middle, Front. It also comes with a lending solution already built it. Something that a lot of platforms do not have. We have been around for nearly 3 years pretty much in incognito mode and have just come out recently. We are not a bank but we have done something that Monzo are doing. That is building a new banking platform that is far away from legacy s/w or h/w. Both are in AWS and both are open platforms.

We love what Monzo are doing. They way they are building their stack with GoLang and the transparency of how they are going about it.

We are not a competitor yet, but when Monzo sell their platform to other banks (a lá Kabbage platform), then we will be competitors.

But what they have done so far is amazing. We wish them all the best. And just for good measure…Atom and Monzo is a chalk and cheese comparison. By building and owning the whole stack, innovation will be extremely fast for Monzo. You can’t say the same for a bank who have various software programs from various providers running the bank.


Interesting stuff. After taking a look at your website I assume this is a bring your own banking license type of offer then? Do you have any information on your pricing structure? I know monese sits on a white label prepaid platform I guess you are taking this to a bigger level with more than just prepaid options.

(james_e_bell) #106

Got a notification about this company today - never saw them before but interesting concept

(Leon) #107

Hmmmm the fist 1000 to invest over £100.00 will have an exclusive Weswap Mastercard…What a prepaid or credit card? Most likely a prepaid card.

(james_e_bell) #108

Prepaid mastercard I think - seems that most of the startups operate on prepaid mastercards - I wonder why they are more widely adopted than prepaid visa (presumably less fees or maybe a more innovative issuance company e.g. Wirecard)

(Rika Raybould) #109

This is entirely unfounded and unofficial but word on the line is that MasterCard are more willing to work with smaller issuers as they messed up their last debit offering (Maestro) in the UK. Visa already have a large customer base with the existing banks and their pricing model reflects the needs of those larger issuers (setup and one time fees can be high as long as per transaction and per card fees are minimal).

For prepaid specifically, Visa appear to have more direct control over their prepaid cards. From the outside, it looks as if they are designed to be Visa operated and controlled while simply branded with a company or retail store name. I see them in the US acting more as retail gift cards on the Visa network than something with a properly accessible account like the MasterCard prepaid Monzo/Revolut/Monese/Virgin Money/etc cards.

( related to Monzo CEO, Investor in Monzo ) #110


Some banks like Handelsbanken have recently switched from Visa Debit to MasterCard Debit, and customer cards are gradually being replaced on renewal or if lost/stolen card replaced