Monzo Staff Weekly Q&A - Annual Report Edition!

Is there a danger Monzo will have to change their vision, design choices and functionality (becoming more similar to other banking products and apps) in order to attract and retain people to use Monzo as their only/main account?

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Hey both :wave: - great to see this type of themed Q&A.

A few different questions, if I might. A couple directly related to the annual report:

  1. I’m not sure the new mission necessarily resonates with me as well as the old one did. I thought I understood what a financial hub was (my interpretation is here), but ‘makes money work’ seems much less defined to me. This might be a big ask, but could you put a few words together to explain what this might mean in a way that’s more tangible?

  2. I was interested to read that your bankers are Natwest. Not really understanding this world, could you explain what this role is and what Natwest does for you?

And some more wide-reaching questions that came to mind on the back of the report:

  1. In some of the press about Jonas’ new role, it seemed to say that Monzo would be putting international expansion on the back-burner and that your focus was on building the best UK current account. Is this an accurate report from your press release? Could you explain any more about the business plan in this area?

  2. Nationwide is currently running a campaign on their legal status of being a building society, playing on how they can literally ‘build society’ and pressing their mutual and ethical foundations. It struck me that it would be difficult, if not impossible, for a challenger building society to emerge. Do you have any thoughts on the structure of the industry and whether there’s a correlation of organisation type to their ethical and business approaches?

  3. One that the investors on the forum might be interested in: can you comment on when / how there might be an exit. Is there increasing interest in a trade sale, for example?

  4. And finally, on a related topic: all organisations go through changes in leadership, in shareholders and in direction. Are you taking any conscious (or, on reflection, unconscious) action to embed a certain ‘Monzo DNA’ in the organisation so that culturally it would be more difficult to the fundamentals of what makes Monzo Monzo? (I might not have explained that very well - sorry).

Sorry for so many questions. Keep up the good work!

:bowing_man: :raised_hands:

:monzopride:

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Any plans to become a B Corp?

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One more question if I may, putting on my finance hat.

What are the main Key Performance Indicators you use to report on progress internally as the bank continues to develop? Have these changed over time as you have migrated from prepay to current accounts?

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I notice there wasn’t much reference to the marketplace in the annual report? Especially in relation to the upcoming year, which I thought that was quite surprising…

You’d have thought given focus on unit economics that would be a priority as well as overdraft/lending products and cutting customer service costs?

Could you please give some colour as to how the marketplace is progressing, when you think we’re likely to see it come on-stream, how many partnerships are in the works, and revenue expectations for the coming year or two?

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@alexlord_y2k posted this in a new thread earlier today. Hopefully it can be best answered here :slight_smile:

It’s great to be transparent but if we can’t make sense of the information that we’re seeing, we miss out on some of the value that comes from that transparency. So could you please explain what makes up these bits of info from the report - or as many as possible at least?

e.g. “credit impairment charges are the loss when Monzo writes off a loan that it’s made to a user” (that may or may not be correct)

from the ‘Statement of comprehensive income’ section of the annual report

  • Interest income
  • Fee and commission income
  • Fee and commission expense
  • Net fee and commission income
  • Other operating income
  • Credit impairment charges
  • Other operating expenses

from the ‘Notes to the financial statements’ section of the annual report

Table 6

  • Fee income on banking services
  • Fee expense on banking services
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these are statutory accounts headings so will be pre defined by the international financial reporting standards

I’d like to avoid having to read those :wink: & I want to make sure that I don’t overlook any sources of income for example, that I may have forgotten about / am unaware of.

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CEO Report Together, this has helped us lower the cost per account to around £15 in June.

About £10 of this cost goes towards providing fast, friendly support: the team who speak to our customers and solve their problems every day, in-app, over the phone and on social media."

As the number of customers increase does the £10 customer service cost remain fixed or reduce as volume thresholds are achieved for example the current cost base can service 10X the current customer base with some modification to support tools so Monzo forecast the cost to service reducing to £1 per customer.

Are customers more or less expensive to service dependant upon the amount of time they have been a Monzo customer?

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Do you feel Monzo could become even more transparent?

Another question (sorry): could you explain what the £15 figure to run an account is made up of? It is all the costs that Monzo has as a company divided by the number of users, or is it more sophisticated? (If so, what’s included in it, and what other costs do you incur that aren’t included in the number?)

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I really hope this is the right team to ask this question :smiley:

I think it’s great that you’ve managed to get the cost down to £15 per user and I look forward to that going down even further but surely this will happen if nothing changed?

As monzo get more and more customers the developer cost per user goes down not because anything has changed just because the % has been diluted?

Also do non development members of staff/non co-ops staff contribute to this £15/user figure? People who aren’t co-op’s and or developers so essentially the bank could run without them? Not trying to discount what they do but I’m talking more the community management side of them? and how do you justify this spend when arguably there would be little difference for potentially hundreds of thousands of pounds in savings?

I’m not sure there’s anything that I’d like to publish in the Annual Report that we don’t :thinking: It’s a pretty standard set of data that companies have to publish. I think the most interesting part is definitely the intro from Tom.

However, there’s definitely more we can publish from internally as part of being as transparent as possible — a few things I’ve been thinking about recently are: our “How to Monzo” guide that new employees get, our company-wide quarterly goals and thinking about how we take the success of The Big List and roll that out to all of our product roadmap going forward. I’d love to hear if there’s more you think we should be sharing too

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The increase in costs were essentially driven by the massive spurt of customer growth we had over the summer of 2017. This included loads of customers that love to travel and overseas transactions are more expensive for us. We also really value delighting our customers and invested heavily in building a wonderful customer support team that could keep up with helping our customers on a live basis. This was all on the prepaid card program, and since we’ve now upgraded most of our customers to the current account, our per customer costs have dropped significantly to just our £10 per active customer

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Yes :slight_smile: We explicitly made much more effort to share this with the media this year.

However, I think much of the coverage was pretty lazy journalism. Writing headlines about how Monzo’s losses have massively increased might get clicks, but totally misses the point. We’ve raised significant amounts of investment for exactly this purpose — we’re not keeping it under the mattress after all, and many of the articles missed the most interesting long-term points — specifically, our huge successes in reducing the cost of each new customer, which is likely to be the biggest enabler of our long-term sucess.

So some of the blame there definitely comes down to us — we clearly didn’t convey to many journalists what was important well enough and paint the picture well enough. But I also wish the media would move away from reprinting press releases with a snappy title and towards deep, well investigated, well thought through examples.

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The honest answer is that very few people (relatively) use Monzo.me and so it’s not a significant cost for us. If it grew massive, we’d definitely need to take a closer look — it might turn out to be well worth the costs because of the new people it brings in. Or it might now. But it’s just not an issue at the moment and so there are no plans to curb the costs :slight_smile:

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Very good question! In order to really offer our vision of Monzo as a marketplace, we need certain permissions from the regulators that let us show you things like investments or insurance — which we don’t yet have. We’re in the process of getting these, so as soon as that happens, we can hopefully kickstart work on the marketplace again. We’ll also have way more people to help then — up to now, we’ve been limited and so only been able to focus on a few things (like reducing costs and driving revenue through overdraft).

The long term plan is still 100% to make money through the marketplace, where Monzo’s interests are aligned with those of customers. We fundamentally believe it’s the fairest and best way we can build Monzo into a business that’s around for years to come.

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Almost all companies have to go through a period of loss when they’re starting up, it’s part of investing in your product and building yourself up for a longer term future. We are just a 3 year old company really and it’d be great for people to also focus on where we’re going - we’ve reduced the per customer loss from £65 on prepaids to about £10 on the current account and we couldn’t have done that without investing our platform and our people

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I think an average legacy bank makes around £100 profit per customer on current account fees and overdrafts, we don’t expect to make quite that much because we’re not planning to charge any sneaky fees :wink:
Overdrafts are definitely an area where we can offer a more affordable alternative to legacy banks but I don’t think it’s a going to be a major revenue stream in the long term. I’m looking forward to the longer term goals of building out a marketplace and offering other features that can help customers more holistically manage their money.

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