📰 The Path To One Billion Customers Will Take 20 Years [Tom] - The Market Mogul

Here’s an unusually in depth interview with Tom (Monzo’s CEO), for a written story :tada:

This is what’s covered & a few key points:

  • What is the profile of your average customer?

  • How are you targeting them?

  • Are you looking to change that? Will you start advertising?

No. We’re looking to amplify our existing strategy. So we’re trying to give people more reasons to tell their friends about us and, in particular, by building network features or features in the app that mean the app works better for you as a customer the more friends you bring on.

About 15% of our users have more than ten friends on Monzo. Something like 55% have at least four other friends on Monzo. So we’re seeing this explosion in social circles. One person gets it, and then their ten friends get it the next week.

  • How many clients do you have at the moment?

    You can see the up-to-date figure here.

  • And how much money was spent/circulated through Monzo last year?

About one hundred million pounds. Last week, about ten million pounds. So it’s growing pretty quickly.

  • Are you on track for launching new products? The current account?

We’re testing it internally; we’ll roll it out to 1000 friends and family and then, over the summer probably, we’ll get the whole bulk of 130,000 people onto the current account.

  • So are you a bit delayed? You said “the spring” in previous interviews.

  • What else are you launching this year?

We don’t intend to launch other products. We’re not planning on a Monzo mortgage or a Monzo savings account or a Monzo ISA. We’re launching a current account, which will be a fully featured one. It comes with an overdraft. But then we stop. And, actually, what we do beyond that is turn Monzo into a platform or a marketplace.

Or, if you have £1000 spare in your account, we’re going to pay you zero interest, but we can help you go to an ISA provider like Nutmeg, for example, and open an ISA in one or two clicks that you can then visualise and control from within the Monzo app.

  • So no lending.

  • What about other areas? GoCardless has access to SMEs. Are you thinking about doing anything with that?

  • Atom bank recently launched a one-year bond. Is that something you will be looking at any point in the future?


  • What about other figures for last year? Revenues?

  • And profit or loss?

Loss. To date, we lost about seven million pounds. Seven or eight million over the two years of the company.

  • Loss. To date, we lost about seven million pounds. Seven or eight million over the two years of the company.

Hard to say. Certainly not this year and unlikely next year. We break even on about 350,000 thousand customers, assuming a bunch of things. A normal growth rate, normal marketing spend, customer acquisition.

So [this year](https://community.monzo.com/t/number-of-monzo-users/4196/48?u=alexs).
  • So let’s say five years from now. Will you be profitable?

  • Talking about IPOs, are you thinking about anything like that somewhere down the line?

Somewhere down the line, for sure.

  • [In] Ten years?

  • What is the shareholder structure at the moment?

It’s all common stock. Management own about half, investors own about half, roughly speaking.

  • How many people in management?

  • What’s the range of salaries for them?

  • You had a problem about two weeks ago.

about ten days ago we finished replacing that third party outsource.

  • Was that [building the replacement for the responsible supplier’s technology] a big investment?

What we did was we built a Mastercard card processor and get it certified against a Mastercard scheme. I wasn’t a huge investment, about £200,000-£300,000 – mostly salaries.

  • And you’re now ready to go?

  • Were clients understanding?

  • Is Sunday a peak day? Or could it have been worse?

  • About your expansion plans. What is the next market you’re targeting in Europe?

our eye is on that target of one million customers. Whether that takes two years or three years.

The reality of Brexit, though, is that, to operate across Europe, we will need a second licence. And so we will probably begin the process of getting a second licence in one of those countries in the next year or two.

  • Which ones are you looking at?

  • When you say one million customers in 2-3 years, is that the target?

we have an amount of capital in place for the next 12 months, which will enable us to get to that profitability number without having to raise more money

  • If you reach a million clients in one year, earlier than your “target”, what happens?

If we reached a million customers within a year, we would probably have to raise more capital. I think that’s the main impact.

The amount of regulation capital that we have is a function of a number of things, including operational risk. The risk of IT systems going too. That is multiplied by the number of customers you have. The more customers, the more capital we need.

  • You are saying in your investor deck one billion customers.

  • So after Europe, which market are you targeting?

The US is very interesting to me, personally, because I lived there for a year, I was very frustrated with their banking systems. It feels like the UK market, but a few years ago.

  • What about India and China? Everyone is talking about them.

what makes me think that we can go and do a better job in China? Frankly, nothing. Whereas the US seems similar enough that we could go and have a good shot at that.

  • What about the market? What would be useful to have still?

A few years ago we had all the peer-to-peer lenders, higher at-risk investments, more access to short-term, unsecured finance, we had several FX players, like Transferwise and Resolute. We’ve seen a big move into mortgage broking now, a bit in insurance technology – I use Cover [SIC - he mean’s Cuvva] for on-demand car insurance – we’ve got ISAs and savings accounts coming up. Right now, the thing that everyone is doing are these nudge savings accounts – there is an oversupply of people doing that right now.
A big area for me is retail loyalty and cashback. You had these Amex air miles and cash back cards, basically founded on high interchange. So, with a credit card, the merchant would pay 2%+ to accept credit card payments and what the credit card company would do is basically take that 2%, give 1% back to you as a customer as a “bribe” to come and use their card and keep 1% by virtue of them being an oligopoly. And the European Union came in and said “that sounds like a competition issue, how about we just cap your pricing at 0.3%.” What that meant is that these credit card companies can no longer afford to give the same level of cash back – you can’t give 1% if you only earn 0.3% and so air miles have been gutted, Avios has been gutted, all the cash back schemes have been totally gutted. But people are still asking for points. And so, for me, that area is ripe.

  • What about the market? What would be useful to have still?

  • Looking at the more traditional players in the market, on a scale of one to ten, where are they innovation-wise?

  • So the problem is not that they’re not innovating. It’s that they don’t want to actually roll it out into their products.

  • What is the most innovative product you’ve seen from a traditional bank?

  • What about a truly innovative product from your competitors?

I think N26 in Germany is doing a really good job and Neon Bank in Brazil.

  • What are they doing that you think is really good?

  • So consumer experience is fantastic.

Consumer experience is the key to all of this.

  • One product you wish you’d developed first?

  • Will you start other companies at a certain point? Do other things? Or are you in love with banking and that’s it?

  • What other industries other than banking would you be looking at?

  • What about UK regulation?

Some people find it very difficult to get access to the documentation required, so they don’t get access to finance. So they end up paying way more for all of their life and basically resort to loan sharks for credit. In the UK, about 2-3 million people are financially excluded. I would like to find ways to help those 2-3 million people come into financial inclusion whilst mitigating and minimising the risk of money laundering and terrorism as far as possible.

  • Do you have a solution for that?

Yes, basically tiered accounts. I believe you should be able to open an account very quickly, get started in a few seconds, with relatively low identity checks, and have spending caps on your account, at least initially. £100, £1000, whatever it is. There is a risk someone will launder £100 or £1000, but you’re actually bringing 3 million people into financial inclusion. I believe that’s a risk worth taking. Clearly, that’s not my choice, it’s a choice we as a society – the Parliament – will ultimately have to make. But with a tiered account, you get started, you prove that you’re using it in a legitimate way, you prove that you don’t have a thousand accounts, you’re not someone who launders money through lots of accounts, you have a single account, you’re using it the normal way, you use it in a radius around your home, you’re getting your benefits or employment paid into it, from someone who’s close by to you. You establish a pattern of behaviour that illustrates that, actually, you are a 21-year-old living in Stoke and you’re not a terrorist financing attacks in the Sudan.

  • When do you see this happening?

  • Are challenger banks affected by the negative image post-financial crisis, post interest-rate rigging scandals? Or is it such a different model?


The editor has now corrected the spelling of Cuvva and Revolut in the article :slight_smile:


What an article! Tom is a good speaker but in writing it all comes together much more coherently and you can really see what a great thinker he is.

Looking forward to a very exciting 20 years :grinning:


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