How would Monzo's UI react to having a balance of millions in an account? Just curious

Might open yourself up to fraud allegations though, Ben :wink: Though they do seem like a crew with a great sense of humour!

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Oooh, do mine next, please! @thomas :wink:

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I think the answer to this is yes. But we’re very much getting outside of my sphere of knowledge.

To my knowledge there aren’t different licenses, but I’m not sure. I would assume you don’t need any special kind of licence. But if a bank was taking of very wealthy customers I assume the FCA and PRA would want to see detailed plans that explains how those wealth customers don’t pose a large risk to the bank (and it’s other customers) or result in less wealth customers from being treated fairly.

If the regulators weren’t happy with your plans and controls then they could prevent you from taking on those customers.

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You’d be hard pressed to find a single billionaire with a billion dollar/pound bank balance. It’s not a good or safe way to hold money.

Most billionaires are valued at such because of their majority stake in a company. Bezos is worth whatever daft amount of 100b because he owns 99.7b in Amazon shares. Not because he had 100b in cash.

Obviously example numbers made up to make a point. I’m by no means an expert but I would have thought even 100m in cash would be an insane amount to hold and very difficult, certainly not in a single account.

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A right load of old baloney, this, but isn’t it fun to have got away from the virus, if only for a while? :face_with_raised_eyebrow:

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It absolutely does.

It all comes down to collateral, which is what @thomas was alluding to earlier.

The following is not financial or banking advice, it is highly simplified to help you understand the kinds of things that banks do behind the scenes to move money quickly

The big open secret is that when you transfer money, it isn’t physically moving. Your transfers are just messages saying “Move £10 from Account A at Bank A to Account B at Bank B". When it gets to the end of the day, all the banks and schemes get together to total up all of the amounts and move that money between banks in one big transaction that takes place at the Bank of England (at a slightly different level).

This is interesting because if Bank A’s customers move £10 to Bank B and Bank B’s customers move £10 to Bank A, at the end of the day when you add it all up, there is £0 to be actually moved between the banks because they net out perfectly.

Now, what happens if Bank A sends £10 to Bank B but at the end of the day, Bank A can’t pay that? That would be big trouble, and nobody wants that. To defend against it, you store an amount of cash called collateral, usually in an account controlled by the scheme. If you cannot pay your bill at the end of the day, they will use that amount to settle the bill for you and probably disable your connection until you put more money in the collateral account.

In reality, you don’t store just one day’s worth of expected net movements because weekends and bank holidays exist where clearing and settlement does not occur, you’d store at minimum five days (Bank Holiday Friday, Saturday, Sunday, Bank Holiday Monday, then Tuesday as a sequence can and did recently happen), but more likely a week or so.

This is where you have Net Sender Caps and other such amounts. You start by keeping track of the net amount of money that bank has moved in or out of the scheme that day (or any period of time between settlements). That amount is the running total of what the settlement bill will be, and if it becomes higher than your collateral amount, you are in very high risk territory and you never want to be here as a bank. You can solve the situation by either adding more money to your collateral account to increase the bar, or if it’s a one off, immediately pay your settlement bill early and start fresh.

(The Net Sender Cap isn’t actually equal to the amount of collateral you hold, but your collateral must be equal to or higher than your cap.)

Why go to all of this trouble? Well, by not having to physically move cash for every individual payment, you can speed up the time it takes to send or receive money! Without this, it would take days to send even £1.

Banks do this for pretty much every payment scheme they operate in, Faster Payments, Bacs (if they’re sending money), Mastercard, Visa, and so on.

So the bank has to hold the maximum net amount it can send in cash with the scheme, where does that leave your billions of pounds?

Well, if you wanted to move billions of pounds into a bank, that would be fine and you wouldn’t cause many serious problems. It would very much alarm us because of the next part though.

If you wanted to move billions money out, that is a huge problem because attempting to do that would immediately blow the bank’s Net Sender Cap and throw them into panic needing to move cash resolve that.

You have a few options to move billions of pounds, do it slowly enough that the banks involved can settle out, send it using a scheme where actual cash is moved and not promises for cash, or work with your bank who can work with a payment scheme and the other bank to coordinate the movement.

This gets back to the tiers of banks comment, some banks are more willing/used to doing the latter two options than others. Some banks just keep higher collateral in particular schemes than others because that’s how their customers use the bank.

Quite frankly, if you have that much money, you aren’t moving that yourself. You are likely with a bank where you can phone up your own personal banker, who will arrange for that kind of transfer to take place for you.


I’ve written this fairly quickly and off the top of my head. I do not work directly on any of this (we have other wonderful teams internally whose entire job is to manage the balance of collateral), so there are likely some mistakes but I hope that gives you a general insight into how banking works several layers deep!

I won’t reveal Monzo’s collateral amounts because they change often and I believe are secret, but it is the Prudential Regulation Authority’s job to make sure we are always able to pay our scheme bills and keep your money safe from a banking perspective as we grow and move more money so Monzo can continue to make money work for everyone. :slightly_smiling_face:

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Holy crap that’s awesome, thanks! :exploding_head: Well written indeed to say it’s off the top of your head!

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Thank you for taking the time - it gives a really good insight into the side of banking many of us will never experience, or need to worry about! I (along with many others) love learning about the inner workings… Rika, can you encourage more blog posts on topics like this?

I guess, outside of wanting to transfer billions of pounds, you could also have a similar impact to a bank (in terms of them panicking) by many customers wanting to move money out at the same time (I’m thinking, Northern Rock type territory here)? Are there ever times where a bank may need to increase their collateral where there’s a risk of that happening? I.e. a bank is about to announce a huge change to the terms of their savings or current accounts and they anticipate a large outbound amount of money, for example?

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I’ve been wanting to post more to my personal site, but I’ll also let the Monzo blog team know!

I’m a bit young to have been working in banking at the time of Northern Rock, but I hear that since then, banks are now required to hold a lot more collateral with the schemes.

Yes, Finance teams should be kept in the loop with everything going out to customers (and also the news!) that could cause a change in behaviours for this reason. I expect the savings focused banks would have increased their collateral ahead of announcing rate changes. :slightly_smiling_face:

For Monzo, our big outward scheme is cards so we might consider bulking that up ahead of particularly large shopping events. (This is why it’s good to participate in both directions of a scheme, it can help decrease your net amount during these times.)

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now i want to see how a trillion dollars would look in monzo. trillion dollar coins are a thing in america, and you never know when someone might actually deposit one :eyes: \s

And thankfully very highly controlled. :grimacing:

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Another interesting point on this is that if we were storing balances & amounts as 32 bit integers (which I bet has been done by some bank out there), the maximum theoretical amount would be just over £20 million. At that point if you tried adding more money, you would go on a negative balance, because… Computer Science! (read up on Integer Overflow).

If we stored balances as Floating Point numbers (which in Computing means a number with decimal points), mathematical operations would be really imprecise, because Computer Science! (read up on Floating Point Arithmetic). Which means 95.50 + 4.50 may not equals 100.00.

So the easiest solution is to store amounts as 64 bit integers, where decimal points are shifted, so £100.00 is stored as 10000, and the theoretical maximum is about 9x10^18. Or store them as strings (ie. literally just a sequence of characters, such as “GBP 100.00”), which we use quite often when transmitting transaction amounts

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This thread has been absolutely fascinating, thank you to all the staff who have contributed!!

Just on this point, I know there are a lot of factors at play here, but could this be one of the reasons why even the most reputable airlines are making customers jump through hoops to get refunds for their cancelled flights? Not because they can’t afford the refunds but because if it were easy and quick to get a refund online they simply wouldn’t be able to move the cash, or am I completely wide of the mark here?

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Thanks for your write up,
Could you link us your site if there’s already posts to read?

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Rika’s site is: paymentswit.ch

Twitter: @NekomimiScience

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Thanks, I actually follow her on twitter, but didn’t think to check the bio lol.

And then I think I’m good at OSINT

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It’s been posted above, but there’s only one post there (and it’s mostly placeholder so the posts page actually renders :upside_down_face:).

This has gotten such good reception, so I’ll be strongly considering writing more and putting it there. :slightly_smiling_face:

That could be one of the factors. Acquirers (the people who provide card payment processing services) typically have little to no collateral because money is typically always flowing inwards during normal times (minus a tiny percentage of refunds).

Some merchants and acquirers with high exposure to businesses affected by the current state of the world are for the first time ever experiencing more money going out via. card payments than is coming in. Many are just not financially set up for money flowing back the other way ever happening.

They’ll have to work it out, because there are many cases where they are required to make refunds that way.

You can see this kind of thing if you have a Stripe account, you can’t issue a refund on a transaction if you don’t have the money in your Stripe account to pay for it.

It’s certainly not the only factor though, I’d bet the business overall bleeding cash is more of a problem to them. If you issue cash refunds, you no longer have that cash to spend but if you issue vouchers, you don’t have to actually book it as a total loss at that point and can try to hold tight, hoping future profit will offset it (I am not an accountant, that’s just my understanding).

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That’s all really interesting, thank you.
As you say, there are a lot of moving parts in this, but it really makes you appreciate the logistical challenge that airlines and other businesses have right now and why it’s not as simple as handing everyone their money back.

Obviously these sorts of events are difficult to plan for, but I imagine a little more transparency on why issuing refunds is such an issue from the airlines, rather than removing the option from their websites, or issuing everyone who requested cash a voucher instead, would have gone a long way but hey, that’s another thread for another day!

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It’s somewhat of a double-edged sword. You don’t actually want people doing the airline equivalent of a bank run because that makes the problem even worse and a collapse more likely, which is bad for everyone involved.

If you as an airline tell people “we’re having trouble issuing refunds because we’re having difficulty moving cash fast enough”, most people would (somewhat rightly) panic and tell people to get their refunds back faster “before it collapses”, which ironically is what can actually cause a collapse so it’s a self-fulfilling prophecy (this is part of why I think the Financial Services Compensation Scheme is so important in banking).

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