US is a very difficult market to enter, extremely saturated, has a lot of legacy processes (cheques, lack of wire transfers), and a humongous amount of banks to deal/integrate with. It is unlikely that US operations will ever gain banking license, or sufficient customer base to not be a huge running loss for years on end. Will never brake even or make profit. At best become a flat loss maker.
Higher interest rates for Plus users.
Interest rates at the moment are very low due to a number of factors. Not just for Monzo but everywhere. The rates are likely to increase in the UK which could mean that Monzo follows suite and increases their rates.
Another reason this could happen is because Monzo has introduced more lending features like Flex so they have an insensitive for people to keep more money in Monzo.
I’m hoping because of this that they will increase interest for plus users to 2% and maybe increase the max amount they pay interest for by a few thousand.
That’s a good question, actually. Interest rates have recently gone up but no changes to interest rates for Plus or Premium customers.
I always find the pay-for-interest dynamic to be a bit weird. In the end: who’s paying whom? “Pay us a subscription so that we can pay you back a bunch of money”. Weird.
Oh, you’re good with the jokes. Very good.
Nobody is stupid enough to pay to get such low interest. It’s just a bonus.
Well it’s already 1.5% for premium. Is an extra 0.5% that much more?
It’s 1% for Plus, but yes, in interest terms it is.
For me it’s more about a reduction (albeit a small one) of the subscription price.
I always like to keep a paycheck’s worth in pot that I can access immediately and hassle free in an emergency, so it’s not like that money would have been earning interest elsewhere without a fee.
It also encourages people to hold more money with monzo so its a win for everyone.
I posted a bit about this before over here:
Monzo can quite easily ignore a marginal increase in interest rates for Plus/Premium (although I wish they wouldn’t - could @AlanDoe invoke someone from the Paid team to give us their thoughts? ) but as the rates increase above that, it might make more (short term) financial sense for Monzo to attract more folk to the free account (or create a third “paid for” tier that doesn’t pay interest but gives you the software features for a nominal monthly payment). Long term, it probably makes more sense to increase interest rates on Plus/Premium, even to the point where the customer can make money out of the account (or get it practicality for free). That way, you’ve got a set of sticky accounts that will maintain revenue when the cycle resets…
Edit: I’ll do some proper modelling later (maybe) but some rough sums show:
Monzo would need to pay an interest rate of 3% for Plus to be free to the customer (assuming they kept the whole £2k in the account)
This changes to a whopping 9% for Premium.
The former feels like it might be possible. The latter not so much (eyes his hat nervously).
Premium is good value vs Lloyds £21 for pretty much the same thing.
£10.50 for LBG staff but I’m leaving soon so premium upgrade has been submitted
lazy web alert
Does Lloyd’s pay interest please? If so how much on how much?
I’ve always thought the premium/plus model was a bit… fragile. It’s threatened by interest rate rises, competitors sharpening up their online banking tools and apps, other banks’ new credit/debit card designs. As well as monzo needing to differentiate their core product from other banks’ products - which is in itself not an easy task - they also need to maintain differentiation between their free service and plus, and premium.
Time will tell, I guess.
My working hypothesis is that it was an emergency cushion in a low rate (plus low travel) environment when Monzo faced an existential threat.
My gut says that it’s probably a useful thing to continue with, especially if they can maintain a spread of ~1% between base rate and paid. But I’ll try and test that later…
I’ll add it to the 2022 wishlist
Don’t need to pay for the Platinum tier to get those rates though. For those who earn at least £1,500/month access to those interest rates can be essentially free via Club Lloyds.
Yeah I get platinum £10.50 and only have to credit £1500 then move it again to waive the fee, and get 6 cinema tickets a year with club Lloyds.
Soon as I leave though I’ll just switch the account to normal and use it for a switch bonus at some point
The interest is not a straightforward perk. It is there to attract higher balances. It is also there to retain people. Some do not get the full interest as they have to pay tax on it. It also offers ability for people to give more money to mozno by opting out of receiving interest. It shares some retention power as the plus/premium physical/virtual/flex cards do.
It is hard to tell what the impact of increasing/decreasing interest rate would be.