Monzo’s CEO on the importance of Unit Economics

Unit economics are one of most important considerations for any company & on the mind of every FinTech CEO right now.


Run a massive, free funfair to attract thousands of visitors from all the nearby villages.

This is obviously the strategy that Monzo & Starling are adopting - the funfair is the current account & in Starling’s case, the free foreign ATM withdrawals for now.

Alternatively, guarantee each merchant a minimum revenue amount to pitch their stall.

I haven’t read enough about this to know whether it’s a viable for the challengers to adopt - anyone? It sounds like it could be very expensive if you want to set up a marketplace with a wide range of providers, in lots of categories.


@alexs :+1:t3: for the awesome share, it’s really good to get @tom’s insight (of sorts) on a pretty fundamental and hot subject.

Taking Monzo the example, I believe a marketplace model absolutely does make sense as revenue driver. By virtue of the relationship a bank holds with it’s customers, the insight and understanding they have on their customers carries some serious value, but it’s going to take some serious skill to balance and pitch this model’s equitability to both customers and partners alike. Trust, transparency and value are critical here.

If it comes down to commission or % rev. share, understanding the CAC (customer acquisition costs) picture is essential. I.e. Is it more efficient for me as marketplace participant to acquire and retain those customers organically under my own steam, or pay a commission to a banking provider? There has been push back; have said that as their model currently stands, they will not pay fees or commissions to be part of banks’ marketplaces.

So what about the legacy banks participation? One strength of Monzo and friends is the potential they have to connecting with customers who don’t connect with the legacy banks and their associated brands anymore, ‘millennial’ or otherwise… If the challengers eat away at market share significantly, the missed opportunities and lost revenue from these customers will start to be noticed, so how do they get a piece of the pie? There must surely be scope for the challengers to leverage the legacy banks’ balance sheets, big budgets and product baskets to offer marketplace solutions. Wouldn’t that offer a smarter use of capital and better ROI, than starting an in house a pseudo challenger banking brand? :face_with_monocle:

There are totally ethical questions around this approach given the previous form of the Big Banks, but perhaps customers could self filter based on ethical consumer scores for example? What do you guys think?

There’s an Accenture paper on banks forming strategic partnerships with FinTechs, I’ll find a link and post it as it has some insights in certain quarters.


Glad Tom’s back on the blog with his analyses. He was missing from it for 2-3 years! The odd typo here and there made me think he just rustled that up on the spot - which is pretty awesome! (Launch before you’re ready).

I like the hidden references to what Monzo is doing, although I think their free fun fare for all the villagers was more like a couple of stalls selling old broken bric a brac and a deflated bouncy castle :sweat_smile: hope the next iteration will be more Disney world :earth_americas: than car boot sale :boot:

Seeing double :ferris_wheel:

I’d be interested to hear @valerio thoughts on Tom’s article on behalf of the revenue team. :thought_balloon:

It all fits @Theodore. Uber reference Amazon lots, they have given a lot of time to Amazon’s model in working out their own plans to ‘take’ a market. :fire:

Edit: Aberrant quote removed.

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Why am I @ in that response?

Edit: I’m not confused by the flywheels btw, I was just pointing out where I’ve seen the flywheel popularised. It’s just an observation that Fintech leaders such as Tom are now using it to get a point across.

@Theodore definitely wasn’t suggesting you were. :man_facepalming:t3: But Tom’s example is a reference to Uber, though not sure whether that’s his draw up or something lifted from an Uber person/prez. I was making a general commentary on your double vision on why it all fits together. Amazon < Uber etc.

Cool. Yeah assumed it was Tom’s drawing of Uber’s business model to illustrate his point. I’ll be using flywheels in my essays from now on :smile:

This is where the drawing came from -

(David was an angel investor in Uber)


Ah, the indomitable Mr Sacks!

@alexs is the real value in minimum revenue guarantee or gaining a greater insight into the customer prospect? Better insight = default risk reduction = more competitively priced risk = higher customer uptake (in a lending scenario for example). To use the oft bandied cliche, [adopts Alan Partridge voice] “seems like an analogue solution to a digital problem”.

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I guess it depends how big the revenue guarantee is :wink:

I expect most of the value will come from the number of users that Monzo gives the supplier access to, particularly if the supplier’s not yet reached scale yet. But I agree, the incentive does seem like a blunt instrument.

With Open Banking on the way I’m not sure how of a USP access to the data will be, unless Monzo’s enhanced merchant info adds value in certain scenarios (& they share that). But I’m sure it’ll be a big improvement vs having to rely on credit reference bureau’s data!


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