With all this brouhaha (I had to look up the spelling) over Monzo Plus: The Next Generation, as a thought experiment I thought I’d try to create my own costed premium account.
The tl;dr: it’s bloody difficult and I have much empathy for @tomdavies!
This is what I’ve ended up with - the figures are all broad guesses so really interested in anyone who has more insight.
A quick insight into what I’ve selected and why. I was looking at two tiers, one with a metal card, and focusing on Monzo becoming my financial hub. So I (unashamedly) have selected products and services that will try and achieve that end. I’ve tried to stick to my principle of no paywalling within the Monzo app itself - I’m open to different functionality being added via companion apps (either developed by Monzo themselves or by third-parties)*.
For the costings, I’ve assumed that Monzo will sign-up 100,000 paid users with a minimum 12 month term. For simplicity, I’m assuming that each product will attract a cost to Monzo, even if it isn’t used by every customer.
Tier 1:
- A better quality card. When I look at my Nationwide card, it seems sturdier and of better quality. I’ve budgeted an extra £5 cost to Monzo for a higher-grade plastic card. Over 12 months, that means £0.42 / month.
- Free ISA at Freetrade. Freetrade sells this for £3/month. I think that Monzo could get a discount on this, but let’s assume that it’ll cost Monzo £2 month.
- An Integrated Credit Card. Working closely with someone like Jaja or Tandem - or another credit card provider - integrating their card into the Monzo app so it works natively (instant notifications, using Monzo’s budgeting features etc). I’ve assumed that it’ll cost £500k for Monzo to develop - which means a cost of 41p/user/month. Let’s round that up to £0.50/month.
- A separate rules engine app. Something a bit like @Flow-app that let’s me automate my financial life. Move money to external accounts when I get paid. Create a virtual / anti-overdraft so that I never go overdrawn (by transferring money from savings when my balance is low). Move money to pots automatically on the basis of transaction reference.** I’m assuming that this’ll cost Monzo £1m to build, which means 83p/user/month. Let’s round that up to £1/user.
- A zero-base budgeting tool like YNAB. Again, a separate app. Again, I’m assuming that this’ll cost Monzo £1m to build, which means 83p/user/month. Let’s round that up to £1/user again.
- 1% on balances up to £2000. That works out at £1.67/user.
Let’s add that all up:
| Product | Cost |
|---|---|
| Card | 0.42 |
| Freetrade ISA | 2.00 |
| Credit Card Integration | 0.50 |
| Rules App | 1.00 |
| Zero-Based Budgeting | 1.00 |
| Interest | 1.67 |
| Total | 6.59 |
So what about VAT and cost to consumer:
| Net Cost | 6.59 |
| Margin | 3.00 |
| Cost Before VAT | 9.59 |
| VAT | 1.91 |
| Cost to Customer | 11.50 |
I might pop back to do the metal tier later.
Any critiques on these figures? Any alternative costed ideas?
*The credit card integration is debatable here. My preference would be for this to be free - and for Monzo to make money on referral / partnership fees. But I think this is probably (just) on the right side of the line.
**Again, I’d see this as a powerful, scripting, bank agnostic app, based around PISP and other functionality. This is part of the Paid Plans debate, but I’d want commoditised versions of the most popular functions moved into the main app for free over time.