Edit - here’s the BBC’s coverage -
There’s some pretty shocking findings in this report about the incumbents use of overdrafts to subsidise ‘free’ current accounts. In particular -
Just 2 per cent of accounts pay more than half of all overdraft charges.
So given that Monzo appears to be relying on lending (& initially at least, overdrafts) to cover it’s costs until the marketplace is generating significant revenue for the business, I’m keen to hear how Monzo is avoiding this type of scenario, which appears to be exploiting vulnerable users.
I know that Monzo has made a significant effort to make sure that users who are unable to pay off their overdrafts quickly, to help users manage their borrowing & to eliminate punitive fees. And Monzo’s lower cost base means that it doesn’t have overheads that are anywhere near as large as the incumbent’s to cover.
But even so can Monzo make the money it needs to from overdrafts by having a relatively large portion of it’s users pay a relatively low amount of overdraft fees or will it end up with a small portion of users paying most of the charges?