It sounds like you might be overlooking Monzo’s planned marketplace there.
The aim is for Monzo to become the hub for all of the financial services that you use. So if you’re looking for travel insurance, a mortgage or a way to earn interest on your savings etc. then Monzo will give you access to providers of those services, through the marketplace or integrations & earn referral fees etc. for doing so.
As long as Monzo users need at least one of those services (& obviously they’ll become more prevalent as time goes on), Monzo will be able to earn money from the user. So (hopefully) there should end up being very few users who only use Monzo for the core banking services & not enabling Monzo to earn any money at all.
If they’re not using those services, the chances are they’ll be paying more than they should for the products they’re using or missing out on services that would make their life easier..This is where Monzo’s ability to analyse our data & point out opportunities for us to save money comes in
Yes sure and perhaps I should have used a better choice of word. Let me back track and say instead that it’s really important for Monzo to become profitable because as a bank looking after people’s money we all want it to be secure and stable for the long term. So I guess it’s important that the business plan accounts for a percentage of customers that won’t be profitable
You realise you have FSCS coverage for your money as a condition of Monzo becoming a bank in the first place, right ?
Their long-term plan is to become profitable, but it’s far from their most important goal — they’re focussing on growth, and getting a large enough customer base to support them, before they start making money.
It’s also worth mentioning that as part of Monzo’s application for their banking license they were assessed on -
business plan/viability;
financial resources, as appropriate;
sources of funding;
owner and controllers;
corporate governance;
risk management;
customer journey;
outsourcing;
IT;
policies and procedures;
recovery and resolution, as appropriate; and
business continuity.
And even now that they have their license, the FCA will continue to supervise them as obviously they’re keen to ensure that Monzo doesn’t run out of funds either!
Many billion dollar tech firms continue to make loses and do not make profits. This list is taken from CNN from 2016.
Snapchat: Snapchat is one of the world’s most valuable tech startups. Yet the messaging service generates little revenue – let alone profits – and it recently sparked privacy concerns.
Box: The online filing sharing company recently revealed it suffered a $170 million loss in its latest year of results.
Twitter: After its much-hyped IPO, Twitter is still posting huge losses. The social network has failed to reach the must-have status that Facebook landed years ago.
Zynga: The fact Zynga is trading roughly 75% below its 2011 IPO price shows just how hard it is to consistently churn out mobile games people actually want to play.
Instagram: Facebook acquired Instagram for $1 billion back in 2012, but analysts say the photo-sharing app is unlikely to be profitable. Yet it could soon be in the black as users continue to flock to the service and advertisers start to latch on too.
Amazon: Jeff Bezos has driven Amazon investors crazy by investing so heavily in the company (see: drone delivery) that profits are wiped out. Yet it’s tough to argue with Amazon’s track record given its $138 billion market valuation.
BlackBerry: The company helped invent the smartphone market but it clearly failed to keep up with it. While CEO John Chen has stopped the bleeding, BlackBerry remains a shell of its former self.
Pandora: After its shares skyrocketed in 2013, Pandora has come back to earth as the music company grapples with huge content costs.
Weibo: It’s known as China’s Twitter and just like the U.S. company Weibo is also unprofitable for now.
Zillow and
Trulia: Both are huge names in the US online house-hunting business and both Zillow and Trulia are unprofitable.
Sprint: The US wireless company isn’t just stuck in the red, it’s wildly unprofitable. Sprint is expected to lose $2 billion in its current fiscal year and another $1.2 billion next year.
Square: Heavy investment in new products have kept Square unprofitable. But that didn’t prevent the mobile payments startup from recently landing a $6 billion valuation.
JD.com: The Chinese online retailer is unprofitable but JD.com (is betting heavy investment will translate into profit-making market share gains.
Sony: Easily the oldest company on this list, Sony is on track for its sixth loss in seven years due to weak demand for its TVs and cameras.
[My edit and more recently]
Netflix: Netflix is making a loss every year trying to get more independent content. I was recently uncovered to be in about $20 billion of debt.
It has been mentioned previously that Monzo have investors who believe in the business and believe in the long term plan for the company - or they simply would not have invested in the company full stop. They invest knowing full well they will need to keep reinvesting every year. Say, you had £100 million to spend on a tech startup. Better to give it in £5-£10 million batches rather than all at once. Monzo will have a business/profitability plan and meeting these targets will unlock more funding. The Bank of England would not have given Monzo a banking licence if it was on the brink of failure at any second. If Monzo failed then you would be fine as you (with a current account) will have up to £85,000 protection (and I would never have more than £85,000 in any bank brand with the same banking licence).
Haha mate, have you seen the numbers on the worlds biggest startups… I would say they are no where near worrying yet… this may be the time when you tell us you’re a VC analyst with some serious excel skills and know more than the community ?
Putting it into perspective - one of Barclays’ two CEO’s, Jes Staley, heavily publicised for scandal, was paid more than monzo’s entire costs in 2016, over £8m.
I think the fact that 120k users is quoted in the OP when there are 400k users gives a good idea of how scientific this critique is.
This is a tech startup in hyper growth. The only foolish move they could make would be to focus on profitability at this stage.
They just need to grow grow grow to a million users and instantly they will be a unicorn.
Oh, and a little bit of context, Uber lost $708 million in the first three months this year (that’s down from $991 million losses in the quarter before: 2016 total losses were $2.8 billion).
So Monzo could make money, they first needed a banking licence and to get that they needed technology - hence the first few years losses as they get the office, get the staff, to build the technology, to prove it works (with a prepaid account) to get the licence, to create the current account from which they can profit (from overdrafts and marketplace agreements).
?
