Just caught the advert while watching the GP qualifying highlights. Here’s the bit where you see Monzo:
Bringing the ‘how does that happen’ campaign to the UK, and Monzo, Trainline and Deliveroo are the first companies to be part of the ads
Advert on their site if anyone wants to see it.
Lending has been a sore spot for the bank, with its latest annual report warning that credit losses could be as high as £20m — meaning it’ll have lost 7% of the total lent out (including overdrafts), in the worst-case scenario.
Seems a bit unfair to present that paragraph as-is without mentioning the completely unexpected and widespread impact of COVID-19. Instead they’ve made it sound like Monzo ballsed up their loan book themselves rather than having being caught out by a 50-year storm.
I’ll also note that the new CRO continues the trend of new hires having ever more experience in the banking industry.
To be fair, Monzo does seem to have cackhanded its way through Covid in comparison to its competitor that has gone from strength to strength.
Sure, the pandemic has had a huge effect in many ways. It’s affected Monzo badly because, in part, of their dependence on fees earned from foreign spending.
From reading these forums over some time now, I’ve always understood Monzo to be conservative in their lending. The reason often given when people come on here saying they’ve not been approved for an overdraft.
Whereas it now seems that Monzo’s loans look quite risky with up to 7% being lost.
Also, interesting the article state Monzo is also currently reviewing its financial crime framework (meaning how it flags scams and fraud) following prompts by the Financial Conduct Authority, …interesting because of the vehement defence by a small number of fanatics in response to anyone who complains their account has been frozen or closed.
The article gives quite a different view of Monzo compared to the understanding I’d gained from this forum.
I don’t like the topic of Lending with Monzo because I have found their lending to be very bipolar. One day I’m eligible the next day I can’t have an overdraft. I was able to take a loan out along time ago so I’m not complaining but their criteria is strange
I’m not sure characterising Monzo’s path as ‘cackhanded’ is fair. Unlucky, maybe.
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People defaulting because of difficulties caused to them by COVID-19 - not in Monzo’s control.
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Bank of England raising capital requirements because of COVID-19 stresses - not in Monzo’s control.
It’s interesting to read now that people think Monzo’s loan book is too risky; before COVID-19 we had years of people coming to the community to tell us Monzo were being too conservative with their loan book. “I can get thousands at the drop of a hat from my other banks and even Starling! Monzo won’t offer me anything. Disgraceful! They need to lower their standards an loan more!”
I don’t think it’s anything to do with luck. It’s business. And their competitor appears to be better at it during the pandemic. And the article does not make for favourable reading with risky loans and scam problems.
I don’t know, though. You can’t always trust the media. But no smoke without fire?
There’s a great deal of luck or chance involved in business, even if you make the ‘right’ decisions every step of the way.
I wonder if it’s more due to demographics instead of luck or whether lending criteria was wrong ?
It’s actually the other way. They need to be stricter, not more relaxed.
Warning - slightly technical post:
On the lending subject - Afraid i’m not going to go into detail, but I’ll offer a few things to note:
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Check what the 7% is referring to - If it’s referring to
(losses to date + expected future losses) / outstanding balance at a point in time(which i suspect it is) then the number isn’t very meaningful as you’re not comparing apples to apples on the denominator and numerator. - Overdrafts are a revolving product where the balance is paid of quite a lot at the end of the month as a customers salary comes in - so comparing to the month end balance (which the annual report does) doesn’t paint the full picture.
- 7% loss rate on it’s own is meaningless. If it’s in a 2% interest rate mortgage portfolio, that’s terrible. If it’s on a 20%+ interest rate credit card/ overdraft portfolio then 7% isn’t that bad and is arguably quite good.
- As was mentioned above, lending is hard during a downturn and we can’t expect our lending to perfect yet without the years of data that our competitors have (unless, like some of our other competitors you can lend billions of pounds of government money with zero credit risk
)
I guess, what i’m saying is make sure to do your own analysis and check where numbers are coming from (although I would say that as someone who works with borrowing data every day )
Has Monzo lost its mojo? | Spectator Life
All in all a pretty accurate and balanced assessment, this article.
But a bundled account stuffed with features you can’t really use is hardly impressive and smacks of desperation.
Ouch.
Why everyone hating on Monzo
Shock that chap who founded organisation that gave Starling three British Bank Awards in a row prefers Starling
Not exactly everyone is it?