How easily can the big banks replicate the Monzo experience

With regards to selling out to a big bank, you know that old phrase, “If you can’t beat 'em, join 'em?”

Well… what if you can beat them? :wink:

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This is what I like - I don’t mind how big Monzo gets. But the reason I’ve been with Co-op/Nationwide for so long is because of their ethics.

I don’t care if they make billions, as long as they stay as a bank - deposits, withdrawals, maybe mortgages and credit cards at some point (although I know that’s not in their plans for now).

But as soon as they turn into a ‘bank’ or get bought by a bank and start getting into investments and funding dodgy stuff (oil, weapons, tobacco, whatever) - then I’ll be gone. I’d be gutted, I so hope that doesn’t happen.

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You mean ethics of charging enormous fees for a returned direct debit or non-GBP payment? :sweat_smile:

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More the other stuff they’re in to - crashing economies, investing in weapons and oil. Stuff like that.

Barclays supported apartheid South Africa for instance.

I liked the idea of TSB being an independent bank that was UK only and just a retail bank. I opened an account. A few months later they got bought by Sabadell, a huge Spanish banking corporation. I closed my account. It’d be so nice if Monzo just stayed Monzo. A plain retail bank, but awesome.

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This is what I would do if I were RBS (or Barclays, Lloyds, etc.). I wouldn’t try to create something like :monzo: with my existing systems. I’d setup a small team with a clear vision and strong leadership, give them operational independence, and let them build away.[1] It wouldn’t result in something that would serve most of RBS’s existing customers initially. But over time, it would be suited to more and more of them, and you could start promoting it to those most likely to want to use this new bank. Maybe eventually the ‘old’ bank stops doing current accounts entirely, but their products can be accessed from the ‘new’ bank. I don’t know. But I do know, that if I were running one of the big banks, I’d prefer that my subsidiary was taking away my customers, instead of a different company.

Not that I personally want this to happen! I wouldn’t use a big bank-owned subsidiary, I agree with others that Monzo’s small and personal approach, and their careful consideration of ethics and how they treat their employees and customers is important to me. I’m just surprised that none of the big banks have tried to set up a ‘challenger’.

[1] Note that this happened in the telecoms sector when O2 set up giff gaff.

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If it were me, I would try and forget about technology and think about what I can do for my end customers and what my value proposition is to them. Only once I really understood the “why”, would I start trying to answer the “how”. I actually believe that banks can do a lot more with their current technology in terms of value proposition and differentiation - techology =! innovation.

Although saying that - there was an article on HBR yesterday saying that retail banks need to take a much more long term view to their investment decisions The Financial Industry Needs to Start Planning for the Next 50 Years, Not the Next Five

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Use first direct as a case study. When it was set up by one of the Big Four it was revolutionary. 24/7 phone banking, and its customers raved (and still do) about it. But its tech is absolutely ancient. Its internet banking and app are both horrendous. Yes, it has operators who answer the phone straight away and know what to call you after you’re voice verified, but the crux is it STILL THINKS like a big bank. You can’t see loan overpayments in the app, you still have to have a credit card paper statement every month for god’s sake! Pending contactless payments don’t show up for three days. The point I’m making is you can dress an old bank up in the latest ‘thing’ but if an old bank is paying for it, you’ll still get old bank ideas. I made this point on another thread, Monzo feels like a tech company with a banking licence, not a bank with a tech team.

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Following on from that, I’ll just share an indirect quote from Jason Bates, one of Monzo’s co-founders

Banks have digitised analogue products not created digital services. Most have done it through learning as little as they have to about the technologies and processes that would accelerate and achieve greater levels of success.

the follow up comment from David Brear, who’s one of his colleagues at the consultancy that he now works for, was

To quote Jurassic Park (as i like to often!) - bankers were so preoccupied with whether or not they could that they didn’t stop to think if they should.

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Sorry to keep going on about B, but it’s where my main accounts are so it’s my main reference point when comparing with old banks.

Literally the only thing B doesn’t have that Monzo does (from an end user point of view), is push notifications, maps and company logos for transactions. Contactless transactions show up instantly and everything.

I think people are underestimating them. As soon as they realise there’s a real threat they’ll be in there.

The thing is, the features that Monzo’s building at the moment are the basics. Look at apps for almost any other industry & Monzo’s simply meeting that standard. So if it wasn’t for the fact that the legacy banks have set the bar so low, we probably wouldn’t be that impressed by what Monzo’s done so far - they’ve simply built the new basic functionality, that every user, of every bank should expect.

It gets interesting once you start considering APIs & platform that’s been built with a modern architecture. The former enables 3rd parties to provide products, services & functionality so that Monzo doesn’t have to & the latter enables Monzo to build new features much faster than a legacy bank.

We haven’t seen the full potential of the platform yet because it takes so much work to build an entire banking platform from scratch but once it’s there, watch what happens :rocket:

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We’re definitely more like a tech company with a banking license than like a traditional bank! For a start, you won’t see that many suits in our office :wink:

Although I’ve never worked at a tech company or startup before I started working here, I have close friends who work at Google, Twitter etc, and we’re much closer to them in terms of company culture than any bank I can think of!

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Some of the most intelligent individuals I know work for incumbent retail banks. It is wrong to characterise them as luddites, they are merely dealing with very different – and typically very challenging problems. Rounds of mergers and acquisitions activity, a changing operating environment, huge back books – they all bring significant complexity. Because of which they struggle to manage change but perhaps more critically, obsolesce. These are huge beasts.

I know of incumbent banks which have built core banking stacks based modern architectural principles: cloud native, service-oriented open architecture etc. Just as a POC – they can afford to throw money at these projects. There are even a number of fairly fintechs selling seriously impressive, to borrow an awful turn of phrase, ‘bank in a box’ solutions. You are probably likely to see is a range of ‘challenger brands’ emerging from the existing players.

So does Monzo have a sustainable competitive advantage based on it’s technology stack? Probably not, someone will replicate it. Even the adoption of a platform business model isn’t particularly unique at the moment - every pitch deck in Shoreditch is creating a quasi-financial services supermarket (although I do think Monzo are perhaps best place to execute on it)

However, Monzo has achieved something almost unheard of in financial services – a brand that has genuine extrinsic value to the user. It is cool to pull out that hot coral card. It’s one of the reasons I find it hard to get excited about Starling – and don’t get me wrong, the app is good. But it feels so stuffy in comparison. There is genuine humanity in everything about Monzo. And you do not get that in the big banks. You can’t fake it. You can’t buy it.

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Well to summarise, people in big banks spend most of their time sorting their papers out than actually improving their products and services. “Having meetings for the sake of having meetings”.

To me it seems like Monzo definitely has a competitive advantage because they built their entire platform in-house and have those people working for them. You can buy a “bank in a box” but you don’t get the engineers nor the mindset that comes with it.

The brand advantage Monzo has is kinda unique and unfortunately for everyone else I don’t think they’ll ever be able to have something similar. When Monzo launched there was no alternative to the big banks, so Monzo is seen as kind of a saviour. Once Monzo sets the bar for what banking should be and everyone follows suit, you will no longer get that feeling with any other bank (no matter how fancy it is) because you’re already used to Monzo and the way Monzo does things became the new standard.

And I totally agree about Starling - I’ve got their account, it works just fine but it doesn’t feel the same. I’m not sure why it’s like that - maybe if Starling came first I would see it differently. Their community does feel a little colder IMO, and overall it looks too much like a legacy bank even with their in-house tech stack (which I’m sure is brilliant).

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Lol with the lag behind of development on Android, Halifax would probably be able to catch up at this rate. I get the point you’re making, but the big banks also have big pockets, so can push a lot more to the App and gain plenty of traction whilst they fix their back end. You guys are developing the backend at the sacrifice of the Android App side.

Perhaps I’m just a saddened Android user.

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I can’t see the argument that Starling and Monzo should be similar, in the fairness of competition there should be a difference and you should be able to chose between those differences. Interestingly I like different parts of both.

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Here’s another excellent blog from one of the Monzo co-founders Jason Bates on exactly this subject. He points out that although it looks like the challenger banks are just a cosmetic improvement, they represent a much greater change & one that the legacy banks will struggle to replicate, the key point is that

While they might look vaguely similar now, the differences run deep. As it’s a fundamental shift from products to services.

& also -

  • The legacy banks have a large cost base to support, which makes adopting the challenger’s marketplace model difficult
  • [The challengers] " have only just put the building blocks in place for the intelligent contextual services that we are only just beginning to see. There isn’t a traditional banking product platform at the heart of a digital bank. It’s a real time intelligent services hub."

I’d also recommend checking out the slightly tense podcast that Jason refers to where he discussed this with the CEO of Curve Shachar Bialick.

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For me the question is not “how easy” can they replicate it, it’s “can they be bothered at all”?

Apps have been around for a long long time, and the classic banks have amongst the worst possible apps available. Even new apps from the likes of Tesco Bank show ‘classic’ thinking, by making me jump through hoop after hoop in the name of ‘security’. Once in, it’s just an ALL CAPS version of my a transation list. Useless.

Banks might hire some smart people, but they’re just blind to the total concept of doing things differently to how it’s been done for a century. I’ve had a current account from Natwest for over twenty years, in that time, no new features have been added. The last update to their iOS app was that it says ‘Good Evening Sam’ on startup, big woop! Each month NatWest send me an email to tell me than in 3 days I can download a PDF of my statement, what are they doing that it takes 3 days to generate a PDF?!

Classic banks just don’t rethink they current practice, and don’t show any desire to either. So they would never make a monzo style app with more features.

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This could change everything https://www.openbanking.org.uk/

Yes I think it will - eventually :wink: there’s more discussion on that here :arrow_down: :slight_smile:

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Wow - that link says Mark Mullen of atom is the challenger bank representative for Open Banking. What a crock.

Atom recently decided not to launch a current account as they had planned (for years) because it will be difficult with things up in the air with open banking. Great open banking role model there. :star_struck:

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