Monzo's core banking product (current account)


#1

Hi,

I’ve recently signed up for a Monzo card and I’m loving the app so far! So far it seems like Monzo USP is to enable intelligent, easy mobile banking - which is great, but I feel the core banking product needs to be competitive too. Can we expect competitive savings interest rates in the future current account in line with what alternative banks are able to offer? e.g. Santander 123 1.5%, Atom 2% etc

Thanks,

Mike


(james_e_bell) #2

I think the Atom 2% being referenced is a fixed saver (e.g. deposit your money and it cannot be withdrawn until the year is up) rather than a current account product (do they pay any interest at all on current account?)


#3

Santander 123 is actually 1.49% Gross (Variable) as per their latest conditions and is only 1.50% if calculated as an AER (which useful for comparision purposes but actually the Gross Variable rate is more informative). THIS INTEREST COMES WITH A £60 A YEAR FEE (paid monthly) and forces you to use a minimum number of Direct Debits even if you prefer to pay by card, FPS, SEPA or standing order.


(MikeF) #4

In the current market, if we start talking fee based banking then I’m out. Interest is all well and good but I’m not going to get into the cycle of fees and rewards. Perhaps a fairer rate comparison (i.e. ‘free’ current accounts) would be more helpful for this discussion of competition?


#5

I too don’t like the idea of a monthly fee, be it £5 or £15. I much prefer when my account charges me 15c, 25c or 35c for services like issuing a bank card or using internet banking as you then know where your money is going and on what. I have a UK bank account that charges 20p for a SEPA payment and I think that is more realistic than the banks that charge £20-25 for the same service, afterall these days it is all electronic even if a couple of buttons need pressing and no longer the paper based process it used to be


#6

and if Monzo promise Free Banking may they stick to that promise. Monese said Free Banking and then changed their mind and introduced a £4.99 monthly fee


(Sacha) #7

I would rather have free banking, with low or no interest on the current account (and presumably future savings accounts) rather than pay a fee. Good service costs money and Monzo won’t make it offering market beating interest rates to anyone.


(james_e_bell) #8

Given the initial post referred to a savings account as well as current account interest rates, its worth actually reviewing what Monzo have shared as their vision of the future for banking before - bank as a marketplace:

While it doesn’t directly say here, what you could image as the implication of this model is what would actually happen is that Monzo does the following:

  1. Make it easy for you to understand your money (how much are you spending, how much could you save etc)
  2. Make it easy for your to connect to the ‘best in class’ providers of other services for transferring that money to (e.g. P2P loans, ISA etc)

Of course its for Monzo to answer but from this strategy I would imagine:

  1. You shouldn’t expect Monzo to offering interest rates or savings products - its not their core business
  2. However do expect in time that Monzo makes it easier for your to manage and route your money to the best savings products available (so in the long term ensuring you get the highest rates/best savings products for you etc)

Just my thoughts anyway!


(Alex Sherwood) #9

There’s a blog post on this coming soon from @tom too


(James Nicholson) #10

The difference here is that we are a bank, whereas the lovely folks at Monese are focused on running a prepaid card programme (we are too, for now, but in future we’ll be offering full current accounts).

We don’t need to charge fees, because our revenue comes from net interest margin, which is made possible because as a bank we can hold customer deposits :slight_smile:


Idea: Monzo for schools
#11

I would be very happy to see Monzo offering a free bank account. I’d be happy that it pays no interest on credit balances and charges sensible fees for an overdraft if they could provide a £50 fee/interest free buffer.

The appeal of no foreign loading on overseas payments is becoming more of an important necessity, it’s a real USP as many other banks don’t offer this, as they are greedy and happy to overly profit from their customers spending their own money.

Also I would welcome Monzo considering allowing young people (14+) to open accounts, guaranteed by parents if required and with no overdraft, but with all the other benefits of the account. Then when at a certain age allowing them to automatically upgrade to a full ‘adult’ account. Catching kids young and getting them into Monzo is important, most kids are steered to banks by who their parents use, but this is a great concept that should be celebrated and enjoyed by all.

Roll on 2017 and a full account offering. Please make it truly unique.


#12

That’s quite if not significantly low margins though right? I would be highly surprised if you are able to make enough off deposits to cover capital requirements as well as lend on overdrafts. I’m pretty sure most of the current banking industry see a current account as a loss, hence the fees being charged.

Of course we probably would never get to see the monzo pricing model right now but I’d love to see how you will balance up.


(Alex Sherwood) #13

Yes relatively low, compared to some of the products that banks offer (& Monzo won’t).
Monzo’s first significant revenue stream will come from overdrafts. Obviously most banks couldn’t earn enough from overdrafts to cover their costs either but crucially, Monzo doesn’t have a network of physical branches to pay for or (to a lesser extent), a legacy technology stack to maintain.

To put this in context, Tom’s said that Monzo is currently losing £40 per customer, per year (there’s 80k users now…) & will lose £20 per customer py once the current accounts launch. Although I’m not sure that those figures include Monzo’s overheads - which are relatively small, as it’s still a ‘scrappy’ startup.

Overdrafts are just the first product though, Tom said at a presentation which he gave a couple of days ago that eventually, he expects Monzo’s online marketplace for additional products from 3rd parties (which will earn Monzo referral fees), to be a much bigger source of revenue than the services that Monzo supplies directly. And obviously a marketplace costs a lot less money to maintain than providing the services directly, while also keeping the size of Monzo’s balance sheet small.


(James Nicholson) #14

I won’t go into specifics (though we published a few forecasts with our crowdfund docs), but you might be interested to know that the CMA’s 2015 retail banking financial performance report found that average revenue for personal current accounts was £100-200/year for each customer’s main current account (defined as one with average credit inflow of more than £500/month) among the eight largest banks :moneybag:


(Alex Sherwood) #15

I would love to see that document without the redactions :spy:


(John Biondini) #16

I wouldn’t mind pay £10/15 a month and have sort of insurance for travels, phones, etc. Maybe if they partner up with an insurance company they could make money from there too?
What you all think
J


(Alex Sherwood) #17

This is the type of service that Monzo’s unlikely to provide because they’d rather give users a choice of products from different providers via their marketplace. Rather than partnering with one provider, who won’t necessarily be offering the best product for some / all users.


(James Billingham) #18

Cuvva hopes to integrate with Monzo’s marketplace in the fairly early days, providing basic motor insurance for your car for around £20-30/month, then you’d pay just a couple of pounds each time you wanted to actually drive (i.e. you only pay for the amount you actually drive - potentially saving hundreds/thousands of pounds vs a traditional policy).

We won’t be providing other kinds of insurance to start with, but your examples are exactly the sorts of things we (and other insurance companies) could offer via Monzo’s marketplace in the future.


#19

Not for me thanks. I could get this from one of the regular banks now, but don’t.

The rate that people have their mobiles ‘stolen’ that insurance would soon skyrocket.

Free banking, no interest, but no foreign loading fees would be okay for me. Charge for overdrafts is okay as well, but a small free buffer would be good.

Charging for a current account is something already done by the greedy legacy banks. Monzo needs a decent usp.


(Alex Sherwood) #20

@munkee I thought I’d give you a heads up that Tom mentioned in the recent London Fintech podcast that

:tada:

Also, items in the product roadmap for 2017 include -