I think I’ve posted something similar before but here’s my pitch:
- YBS and the Coventry Building Society offer offset mortgages. They used to both offer offset current accounts - but Coventry have stopped theirs and YBS closed their N&P brand which offered one.
- This means that the only big provider that offers an offset mortgage / current account is First Direct. They could do with some competition!
What’s the solution?
- Monzo offers offset current accounts using the Coventry and YBS’s banking licences.
- The offering is identical to the standard Monzo offer - including fees and charges. The only differences are a) the small print of who holds the money (and offers FSCS protection) and b) that you can create offset pots.
- The balance in your current account - and any offset pots - would then offset against your mortgage. Which would be fully viewable and manageable in the Monzo app, too.
What’s the benefit to Monzo:
- Charge the building societies a management fee for each account. Say £10/month.
- The marketplace / financial hub model is proven and builds itself.
- The building societies advertise their mortgages - and contribute to Monzo’s growth while Monzo is getting paid for it.
What’s the benefit to the building societies:
- No competition issues - they’ve already left the market for current accounts (because they can’t keep up with the competition)
- Monzo can almost certainly service current accounts cheaper than they can themselves
- They can (finally) offer a product that is digitally native and is an integrated mortgage / current account solution.
- The service cost to Monzo will be offset by the additional revenue / greater take-up of these products.
What happens at the end of the mortgage term?
- Monzo becomes the hub to remortgage with the same or different supplier.
- Offer the customer the ability - with a simple tap - to transfer the current account to the balance sheet of different building society or back to Monzo itself.
Simples. And a profitable, growing Monzo.
(Now, if only Tom knew someone who used to run banking and mortgage operations for YBS’s N&P subsidiary - or the Chair of the Coventry Building Society…)