Because that’s now what they’d want from an acquisition of Monzo. You appear to be completely disregarding the technology stack, which is a massive thing. And even if all they wanted was customers and deposits? Still worth acquiring Monzo for - you get the whole customer base that way instead of a tiny fraction (because if Monzo fail, their customers are going to spread across loads of banks, not just one).
I’ll grant that I hadn’t seen Starling’s report at the time of writing the above, and it’s fair to make some comparison to how they’re doing. However my point was more on how the banking sector as a whole are being hit by Covid wrt/packed accounts being less viable (travel insurance problem) and potential bad debt making huge holes in the pockets of many. In those terms, the industry is facing many of the same issues as Monzo on an ongoing basis.
tl;dr, Monzo’s ‘troubles’ are overstated and it’s really not a stretch to see the value in acquiring Monzo.
In a country with fewer residents than Revolut customers and a questionable regulatory background. They wouldn’t be able to cover Revolut deposits if something went tits up
I think the interesting point from that wired article is that the Capital requirement for Monzo was almost double everyone else’s at one point.
Profitability of New banks has always been a concern, this is nothing new.
Personally I think the focus on values over substance is the issue, but that is a completely different conversation.
I think they are on a very similar trajectory in terms of profits , losses , amount of deposits , staff costs, loans , granted Starling saw the opportunity of business account revenue before Monzo did , and have a better market place offering , although not producing much in the way of profit to any great degree
Starling are doling out “free” Govt. money left right and centre, so one would expect that their business accounts would surge, and because you have to have a personal account before getting a business account to access that lovely free money those numbers have “surged” to 1.5 million also … how the govt funded loans pan out in the future in terms of defaults who knows , but the "surge " in customer numbers will also result in a “surge” of customers enquiries and admin costs .
Starling could be in a similar situation to Monzo non profitable accounts, where potentially their new accounts will not be generating money ( albeit the 2.5% handling fee ) and costing because of increased staff numbers to deal with the increased enquiries.
Now if Monzo run out of money, before they can turn to a path to profit, I agree an acquisition by an established bank could well be on the cards
There is an easy way to make some money - charge everyone.
Why should bank accounts be free? I’ve been using Monzo since an early Beta (my user number is within the first 25,000 people) - so probably over four years now and in all that time, I’ve used Monzo as a pre- paid card and then as a current account upon them launching them and Monzo have made absolutely no money out of me.
Not one charge, not one penny!
We pay for our utilities, our TV (even if it is just the license fee), so why should banking be completely free? Even if Monzo had an annual account management fee of just £10 per person - thats at least £40m they could make based on user numbers.
Yes they will have probably made money on me having an account and using it - but personally I have not parted with a single penny.
I think if people paid a small annual charge, then you might get those with dormant accounts actually using them and then Monzo will make some money off of the back of it.
There is the danger that we will be sitting here in a years time complaining that the bank is being wound-up, when we could have helped out with a fee.
Another alternative would be to have basic functionality and in-app purchases to add on different bits of functionality. A bit like the “plus” account, but for individual functionality.
Don’t think this would work seeing as every other account in the UK is free. They need to develop some powerful budgeting software. That’s what I thought Plus would be, then charging for that would be fine.
The paying part. I would pay if there was any value but there isn’t any. Why should anyone pay for a business that doesn’t provide enough value to be competitive/sustainable is beyond me.
Edit: Being an investor obviously means I did saw a value at the time, but the monzo I invested in is not the same monzo it is now.
I do agree with your general premise. Maintaining large IT systems and employing staff isn’t free - and that cost does need to be borne somehow. In Switzerland around 20 years ago, all the banks started charging their retail customers, and although this was initially a bitter pill, it’s since become expected.
However, this would only work in an environment in which other banks also charge for banking. With interest rates at record lows, overdraft fees now subject to regulation, and an increasing number of customers likely to default on their loans, I suspect that many other banks will be looking for ways to increase their revenue, so we may in time see a move from different players to charge for accounts.
I suspect it would only take one bank to begin charging for all the others to follow. The challenge is that none of them want to be the one to jump first. The other challenge is that Big Tech might then come along and offer some of those services for free, to make customers even more reliant on their other services (Google) or devices (Apple).
It’s a difficult one. I’m pretty-much happy with what I get from Monzo. I don’t need the extra “features” in Monzo Plus, I don’t need a loan and don’t need an overdraft - so going forward, for me, it is 100% free banking.
Which is nice, don’t get me wrong, but it seems slightly unfair - I get use of the app, all the updates, all the “free” functionality, a free card, all my direct debits paid regularly, standing orders, the ability to move money easily etc etc and it costs me nothing.
Must admit, I struggle to see anything which I need or don’t already have in some other way.
I can’t help but think that profitability can only emerge through diversification and a real shift towards this being the primary account for the vast majority of users. The elusive “Total Monzo”.
I may be wrong, but Monzo’s success in building a strong young fanbase may have created its own problem. That fanbase demographic is far less likely to be bothered about a full banking service than having easy to access funds & a valuable forum resource for information gathering and sharing.
Monzo refuse to acknowledge the blockers to this though:
*cheque imaging
*more reliable cash deposits via the post office
*flawed system for increasing limits
*lack of bic number/sep
All 4 are reasons why alot of people are not “full monzo”.
In chasing that younger demographic markets thats cheaper to run theyve pushed out valid ways of increasing usability of the current account and ways to increase the average amount held per customer.
Too idealistic at times and stubborn to listen i personally feel
