I really like the idea of the Monzo marketplace for financial products (savings, mortgages, electricity and gas providers, insurance, …); the stated long-term goal for Monzo’s product and, crucially, revenue stream. However, I worry that it is internally inconsistent. In the recent open office @tom answered a question about this where his reply included:
If you are too effective at switching then you actually kind of destroy the individual market you’re in.
Without giving you my really long thesis on price comparison and where that industry is going [laughs], I think that the future of price comparison lives in the current account.
and, further, later on:
And so I think that in principle we would prefer to work with providers who have long-term sustainable pricing.
Now, perhaps this alluded thesis is indeed the explanation that I am looking for, but allow me to ask the question in lieu of knowledge of it: for many of these product categories there is almost no essential differentiation between products provided by different providers, save for a single number. Think of a basic savings account: interest rate is king. Or an electricity provider: fundamentally you are paying per kWh. Much of the product differentiation that providers concoct is aimed to create differentiation where there is none (and, somewhat to dupe the customer with, say, favourable introductory rates) - and, from Monzo’s rhetoric, this type of obfuscation is what they are aiming to cut through. So, what happens once Monzo has stripped out all product differentiation from each of these product categories and made it a couple of clicks to change between providers? Will providers want to sign up to a system that may “destroy the individual market”? Would these individual markets end up as monopolies with winner-takes-all? I do, of course, understand that in some places (such as where capital is at risk) that there is choice to be had (pick-your-risk). But in many - if not most - of these product categories the products are so similar that the above scenarios seem inevitable.
So, to summarise: is Monzo’s marketplace strategy internally inconsistent, where the inconsistency stems from reducing switching friction and then simplifying comparison of products in categories where there is no real differentiation?