Monzo, Where to next?

(Tristan) #22

Thank you Ian that makes a lot of sense. Do you happen to know what the BOE tiering and the requirements are or where I can find out more information.

(Tristan) #23

I think they use fancy accounting models to determine the risk weighted assets for each bank, since each banks offerings differ that affects the capital requirement the models used also vary from country to country as set by the different regulators, so if Monzo does increase its product line, we may actually see this happening abroad before it happens in the UK.


Profitable for now.

Financial products (some of them at least) are on the path to being commoditized. That means that, like electricity, the actual product isn’t differentiated - British Gas’s electricity is much the same (or identical to) Bulb’s after all. The differentiation happens with price (and to a lesser extent customer experience and brand).

Why’s this important? Well, when you consider a future where savings accounts are largely interchangeable and that you’re probably going to be chasing the best rate, then the ‘hub and spoke’ - or platform - model comes into play. Put simply, a platform aggregates demand and disaggregates supply. Think of your app store of preference. They tend to make money through small intermediation fees.

This is a fundamentally different model to the vertically integrated one. Monzo is banking (pun intended) on disrupting (and eventually commoditising) financial services. It’s not without risk, but if it pays off we’ll have the next Google or Facebook on our hands (though hopefully with more ethics).

You also asked why can’t Monzo do both. I’d argue they can’t. If they want to pursue a vertically integrated model they should just do that. But they’ll find it super hard to be a “me too” bank.

By following a platform play, Monzo really can’t have their own competing products. They need to grow the suppliers on the platform/marketplace, sure, and get customers comfortable with the model. But a hybrid model would spook the market and make potential suppliers unsure of Monzo’s intent.

(Tristan) #25

Thanks Peter, can you explain to a layman like myself a little more about what needs to be done to have these financial services commoditised. I take it it’s more than just aggregation but what’s to stop the legacy banks from doing the same thing, or moneysupermarket or what’s that company with the russian meerkats?

Also I haven’t given up on advocating for the direct sales model, yes it spooks the market, and yes I remember when the supermarkets did it they lost some suppliers, but fast forward to today and everyone does it. Just as long as you’re not caught prioritising your offerings ahead of everyone else, (hello Google) but agree that it only works if your already in a dominant market position, so probably not the best time.


I’m not an expert, I’m afraid. If you’re interested, so some googling on platform-based business models. I like the app stores example - it really shows how the model works.

Effectively, I think there’d need to be some form of market shift to make this happen. Other banks would need to come away from the vertical integration model. And there’s nothing to say that they will - or whether it would just mean that they are just delaying the inevitable, if they’ll reinforce the vertically integrated model or whether they’ll go the way of Blockbuster.

Nothing. The skill, I think, is being one of the first to market but with one of the best products/platforms. Look at app stores again - the market seems to have decided that only two are viable at the moment.

There’s nothing essential about Monzo that means they’ll win. But they’re well positioned to have a good shot.

Another app store analogy. Imagine we’re talking about Apple after they’ve launched apps. Would we be wanting them to focus on creating a vibrant store with all sorts of apps, or asking them to concentrate their limited resources on creating each and every app that people want in house?

(Splodf) #27

Business account is next, see the thread.
Joint accounts are live.
If you read the prospectus before investing you’d know that Monzo had recently acquired its ISA license.

All aside, I do agree with you that Monzo needs to start doing more to either differentiate itself or diversify. At the moment we have a great app. How long will it be before the money pits that are the legacy banks catch up appwise. Barclays are already making great strides. The others won’t idle forever and a great app on its own won’t win you the battle.

(Tristan) #28

Thanks Peter, food for thought…in keeping with the analogy, I bought the android G1 when it first came out and I think there was a total of three or four non-google apps for the first six months. So Google invested a great deal of effort to develop apps and kickstart development, nobody knew how to develop for Android at that point it was brand new.

I worry that Monzo would be overtaken by bigger budgets and larger customer bases and be left behind, your point on being first to market is spot on though. Apple, Android were a success, but Microsoft app store was a complete failure nobody would develop for it because of the low number of users, and users wouldn’t take up the phones despite them being quite good h/w devices because there was no apps on it. Catch 22.

(James) #29

I would like to see virtual cards so i can use it online then destroy it in the event a company has been hacked like BA.

(Tristan) #30

You already have this functionality you can freeze your card, either in app or online. Preventing any transactions occuring.

(Splodf) #31

Not the same.

A virtual card is for a one off transaction with a company, for example, you may not trust 100%.

You give then the details of the virtual card, a second in app only card if you will, the after the transaction has completed destroy the card in app.

(Micky) #32

I have to say I don’t agree with any of that except for the long term focus on the market place

(Fin) #33

Primarily because it would be a massive conflict of interest.

The current banking models that you’re advocating (say, Santander for example) flog you their loan, their mortgage, their travel insurance – but unless you do your homework you never know if you’re getting the best deal.

Monzo’s marketplace solves that as it connects the customer to the whole market (when it’s fully set up) – and it’s a process that’s focused on getting the customer the best deal, as opposed to maximising profit through a single vertical channel.

To implement that marketplace, and then to compete with it at the same time with Monzo loans/mortgages/travel insurance – removes the certainty that you’re getting the best deal, because all of a sudden there is a massive incentive for Monzo to push their own products (as they will be earning 100% rather than the likely 10-15% fee they will earn through the marketplace).

For example, are Monzo really going to connect HSBC (who may be offering loans of 3%) to the marketplace, when Monzo’s loan is 5%? Nobody would take Monzo’s loan would they if they could get a better deal with HSBC? The whole point of the marketplace is the trust being placed on Monzo to be an impartial middleman and get the customer the best deal.

It becomes an exercise in futility and the value proposition of Monzo gets destroyed overnight. Monzo don’t want to be a bank, they want to change banking, and therefore shouldn’t follow conventional banking models.

(Tristan) #34

Thanks for explaining

(Tristan) #35

First off monzo arn’t the cheapest at anything really, and don’t aim to be, but I will say they are the most transparent, so if they aren’t they tell you why.

They arn’t in it to get you the best deal but to make the entire process transparent and work for buyers and sellers which will in time make things cheaper by lowering the costs of the process of getting financial services, it won’t lower the costs of the services themselves as that will be dictated by the markets supply and demand.

Your mortgage for example you are right generally the cheapest offer wins as you suggested, but not always I may want a policy that allows buildings to be mortgages in a floodplain area or one that covers listed buildings etc… there’s always people looking for that special deal. Monzo facilities that by connecting buyers and sellers. An important note to make is the reason why you don’t get a provider as the constant cheapest provider is that each financial product has to be backed by capital and when that capital drys up, the offer is withdrawn from the market and generally people can’t find a cheap mortgage anymore.

An important reason for monzo to participate in the market is to facilitate competition, I understand why you say

But you it would be difficult to game the system and outcompete the sellers, the regulators would certainly have a thing or two to say if Monzo unfairly placed it’s offers ahead of others, thats how Google got the largest anti trust penalty fine …ever. it would give monzo an alternative income stream and help them refine and better the market as they would understand it that much better as a participant.

Also let’s face it, if monzo don’t want to make money they shouldn’t be a bank at all should just become a not for profit, or a cooperative, it’s only a conflict of interest if you put money ahead of all your other values.

Google continues to run its app store and continues to offer it’s own brand of apps, both in its app store and in Apples, the end goal being to offer services that are in demand and to retain customers, and to be a successful and profitable company.

(James Prince) #36

I like the idea of Monzo opening its platform to a web-based form so that we can view our account details online on are laptops/desktops etc. I believe this is the main reason why a large majority of my family are prevented from using Monzo as their bank of choice.

I also believe that your statement regarding face-to-face connections is vital for anyone dealing with my finances. I believe that in the near future - Monzo will have to look at developing a call centre or helpline etc.

I found myself visiting the HQ just before the Christmas holidays and was shocked to find that even the lady at reception was unable to put me in contact with any individual and was more occupied replying to emails at the front desk. I even remember two individuals walking in their office for a meeting and they were told to sign in via the iPad displayed infront of them. Like literally even entering Monzo’s office their is no face-to-face contact or human interaction. I was very disappointed with this as all I wanted to do was set up a meeting with someone from the careers department at a future date but was advised to go on the app and speak through the Monzo help forum to book a meeting! like seriously, I was in the office right there and then and had travelled very far and all I wanted to do was set up a meeting which they told me to do via the app.

Not all pessimistic as I love Monzo and thus that is why I invested in the company and will continue to watch it grow, I am just also stating that I don’t want to loose human interaction with every service I am offered in the future especially ones concerning my finance.

Monzo - 2019 - Will it Thrive or Fail?
Monzo - 2019 - Will it Thrive or Fail?
(Fin) #37

I understand your points but I disagree I’m afraid. I think transparency and trust are heavily interlinked, as soon as Monzo compete with the market there is an element of trust (both between customers and Monzo, and suppliers/third parties and Monzo) needed by customers/suppliers, that isn’t currently needed now.

We’d need to trust that Monzo are as honourable as their word, and that capitalism and greed wouldn’t take over. We’d need to trust that whenever they stated they were being transparent they were being 100% honest, and not negating any element that may or may not favour them.

I think the difference is that Monzo have that trust in abundance right now, because they operate differently to the incumbents. To change that would introduce a certain amount of moral hazard, into a corporate and financial services industry which is famous for it.

Not for a minute saying Monzo couldn’t be trusted in such a scenario – but I think there would be plenty of people that really value Monzo’s current proposition, that may be wary or dubious if it were change as you suggest and make them less likely to switch to something they may deem “more of the same”.

Also, as you say, they’ve stated they don’t want to be the cheapest – so I’d wonder whether they would want to spend time and development hours producing products that, in all likelihood, wouldn’t be used by most customers (as they’d probably go for cheaper options). I don’t think it would necessarily achieve your goal of Monzo making more money.

I also don’t think Monzo don’t want to make money, they do, they want to be sustainable long term, they just want to generate revenue differently to others, and have stated that they are prioritising growth (i.e. knowingly burning cash through advertising/referral bonuses etc.) over profit right now – which is fairly typical of early stage tech start-ups (i.e. grow the user base, then monetise it).

With respect, I think you’ve missed the point of my example – Monzo wouldn’t be obligated to include certain companies in its marketplace – that’s not anti-competition like the Google example.

Again, take your points, but disagree that they would work or benefit Monzo in practice.

(Jamie 🏳️‍🌈) #38

Do you have a particular study which points to these findings, or is this a personal preference of yours?

(Tristan) #39

I didn’t start the discussion because I hold all the answers, or am convinced I’m right, infact someone who disagrees and takes the time to explore and explain why I may be wrong and why they think so is far more useful to the general discussion, so thank you for taking the time to explain. You certainly pointed out many things I hadn’t fully considered.

(Tristan) #40

If Monzo are aiming for 1 billion customers they need to open up different access options.

There are those that prefer to hear a human voice at the other end of the line, and if running a business account, they need to meet with their banks face to face.

Monzo being touted by the press as an "App Only" makes me cringe, as just excludes everyone who prefers not to bank by app, its more than useful on the move, but limited and frustrating when you need it to do more, and it ignores the obvious point that if I lose my phone, I lose access to my mange my finances. Online banking is not a nice feature, it’s a necessity.

Studies, and there are many out there, point out that the digital age has not made branches pointless.
However, as a start-up with limited capital, it’s a huge risk to load up with that much debt at this point, and I don’t believe it to be a good idea anytime soon, of course they should continuously to look at when it may be suitable, I dont imagine it will be any time soon, as some banks happily do without, they just lose access to that segment of the customer base.


(Micky) #41

What can’t be done within the Monzo app that would be solved by opening branches or call centres?

People that don’t use smart phones are excluded with the app based banking but then they are minority, so why put so much money and resources into acquiring those customers? It’s not like Monzo’s growth has stalled and they need ways to draw in different types of users. I can’t comment on the business account side of things, I’ve got no knowledge of that