Monzo isn’t looking at a banking licence / charter in the US.
The approach in the US will be more “sophisticated” and more “segmented” than the UK:
“The US is a huge opportunity and a huge country — but it’s super fragmented. This means there’s a more sophisticated, segmented version of Monzo in the US that we would be talking about,” Bhatia says.
Monzo will more likely target one demographic (e.g. age or geography), which Bhatia says can be big enough to start scaling in the US.
“This means Monzo US will be a little bit less about the ‘all things to all people’ bank we’re building in the UK,” she says.
I’m not at all sure I like this. I get that the US is bigger and that therefore banks can be more niche. But I think that calling the US offering more sophisticated is a poor choice of words that will only offend the main market (who in the UK wants a less sophisticated version?).
And the UK is already arguably segmented by age. Monzo is basically the bank for millennials (and gen Z). So I wonder what’s really meant by this. There doesn’t seem to be an answer in the article so are they starting with the principle of “we need to be more niche in the US” without really knowing which subset they’re going after?
That aside, I’m not a big fan of divergence which looks like what will happen here.
Let’s use this topic to discuss differences and divergences between Monzo US and Monzo UK.
She’s trying to be polite about the fact that the US is a complex mishmash of systems both at state and federal level and that the approach she outlines makes more sense. Many of Monzo’s core features are either difficult or impossible to implement. Also many Americans are paranoid about digital products in a way you don’t see here.
But I think that calling the US offering more sophisticated is a poor choice of words that will only offend the main market
Yes I remember the riots when HSBC suggested they would sell a particular pension product in china and not here.
I’m not sure there will be huge divergence to be honest with you, I’m not sure they can really diverge enormously to be honest. Over time they will replicate a lot of the functionality provided in the UK, and add features specific for the US market, like cheques or tipping features - I wouldn’t say that’s negative divergence.
Ultimately it’s all a journey though. I think it makes sense for them to pick a subset of the market to target first off, then build from there. If they chose 18-40 for example, they’re not just going to stop there after building for 5-8 years and gaining market share, they will set a new target.
Same with the bank license. It doesn’t make sense for them to go for it now, but five years down the line with 20-25m+ customers and big turnover, with the prospect of adding more through the license? 100% will go for it then, or buy another player (cough* Varo cough*).
Pretty much that. It has to be more sophisticated because the US banking system is so god damn awful. Subtext - they have abandoned trying to make banking easy (like in the UK) and are chasing revenue instead. They failed their mission.
My understanding is that banking in the US is regulated at state rather than federal level. Therefore, what Bhatia is trying to do here is a oid saying “The USA has a stupid regulatory system that creates far more work for us and makes breaking into any market harder.”
Therefore, in this case, the use of the word ‘sophisticated’ is 100% euphemism - compared to ‘segmented’, which is much more simply factual.
And finally, while I take the point that the UK market also appears segmented, that’s almost entirely down to marketing. Which is different to be segmented the way the USA market is by their mish-mash of legal and regulatory matters.
This is an interesting discussion. I think I read the article very differently to most folk on here!
So I totally get the difference between the markets. And the financial products and approach does have to be different. I think we can all agree on that.
My reading, which might be flawed, wasn’t that the US market was fragmented, but that Monzo wasn’t building a general purpose product. Instead, they were looking for a niche (something like under 30s in NYC - that’s not real, it’s an example) which they’d then build specific and deeper tooling for.
I think my reaction was mostly one of not liking the idea that US might build deep and sophisticated software tools - which they then wouldn’t seek to replicate elsewhere because the UK is trying to be "all things to all people“, which I read as being happy with mediocrity and the lowest common denominator. I want sophisticated tools.
As I say, this might be an interpretation thing. I’m very up for differences in financial services. Less so in the app experience and the software feature set. And I’m totally in agreement about the messy regulation and banking rails landscape in the US!
I think it’s the right decision, it’s probably simpler from an economies of scale perspective to identify a niche/small demographic, build out a scalable core base and pivot from there to greater things.
It’s possibly also an admission they they got it wrong the first time and have learnt they any other path forward might end in disarray.
They essentially started out that way with the U.K. the product was primarily designed for young salaried Londoners. Take a step outside London or find someone who wasn’t salaried, and the package started to fall apart. Even now, after all these years, it’s made some steps in the right direction, but the product ultimately does still suffer from this.
They’re a latecomer to the US, but were first here. I don’t think they’d get away with it at this stage. Because it becomes a question of why use Monzo when I can get chime?
I’ll admit to knowing nothing in detail about US operations but my understanding from limited knowledge is that for the UK market I’d agree - being too niche here is going to be difficult/almost unenterable these days.
Is this the same for the US? Genuine question, is there a market for a broad fintech with limited specialism in areas. I would think that if this could happen it would’ve already Happened,no?
I know that US banking is heavily complex and fragmented/legacy so not sure how fintech’s stack up to that
Interested to find out more about how things work over in the big states and why this might impact what Monzo does the second time around.
From what I have gathered reading this (and quite a few other) forum, US banking is totally different to anything we are used to here in the UK and also much of Europe.
If Monzo are able to break into that market, then the best of luck to them, but I do think they may have a bit of a difficult time.