Monzo isnât looking at a banking licence / charter in the US.
The approach in the US will be more âsophisticatedâ and more âsegmentedâ than the UK:
âThe US is a huge opportunity and a huge country â but itâs super fragmented. This means thereâs a more sophisticated, segmented version of Monzo in the US that we would be talking about,â 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.
âThis means Monzo US will be a little bit less about the âall things to all peopleâ bank weâre building in the UK,â she says.
Iâm 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 whatâs really meant by this. There doesnât seem to be an answer in the article so are they starting with the principle of âwe need to be more niche in the USâ without really knowing which subset theyâre going after?
That aside, Iâm not a big fan of divergence which looks like what will happen here.
Letâs use this topic to discuss differences and divergences between Monzo US and Monzo UK.
Sheâs 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 Monzoâs core features are either difficult or impossible to implement. Also many Americans are paranoid about digital products in a way you donât 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.
Iâm not sure there will be huge divergence to be honest with you, Iâm 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 wouldnât say thatâs negative divergence.
Ultimately itâs 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, theyâre 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 doesnât 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 âThe USA has a stupid regulatory system that creates far more work for us and makes breaking into any market harder.â
Therefore, in this case, the use of the word âsophisticatedâ is 100% euphemism - compared to âsegmentedâ, which is much more simply factual.
And finally, while I take the point that the UK market also appears segmented, thatâs 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, wasnât that the US market was fragmented, but that Monzo wasnât building a general purpose product. Instead, they were looking for a niche (something like under 30s in NYC - thatâs not real, itâs an example) which theyâd 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 wouldnât seek to replicate elsewhere because the UK is trying to be "all things to all peopleâ, 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. Iâm very up for differences in financial services. Less so in the app experience and the software feature set. And Iâm totally in agreement about the messy regulation and banking rails landscape in the US!
I think itâs the right decision, itâs 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.
Itâs 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 wasnât salaried, and the package started to fall apart. Even now, after all these years, itâs made some steps in the right direction, but the product ultimately does still suffer from this.
Theyâre a latecomer to the US, but were first here. I donât think theyâd get away with it at this stage. Because it becomes a question of why use Monzo when I can get chime?
Iâll admit to knowing nothing in detail about US operations but my understanding from limited knowledge is that for the UK market Iâd 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 wouldâve already Happened,no?
I know that US banking is heavily complex and fragmented/legacy so not sure how fintechâs 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.
