You might be suprised how many people use overdrafts…As Paul pointed out -
James (one one of the Monzo team) likes to break out some stats when this question comes up in the developer’s Slack team -
All of the below figures are from the CMA’s 2015 retail banking financial performance report.
- 7/10 people use overdraft on average each month, and average overdraft utilisation is around £700
- average in-credit balance is around £2k
- big banks make about £120-200/customer/year on current accounts
Apparently (there’s no source for this) about half of that £120 - £200 is punitive charges (which Monzo don’t do) & the other half comes from other sources of revenue, i.e. interest from overdrafts + whatever interest the Bank of England’s prepared to give Monzo, to hold their deposits of customer’s funds. So they could make £60-£100 per customer, per year (or…that could be way off the mark).
That makes sense, the flip side is that some users will have been attracted to Monzo because they really do need these tools, just to break even & since they’re close to the end of their bank balance, they’d be more likely to want an overdraft.
When it comes to students - I know that I used that overdraft up pretty quickly so if I had an opportunity to borrow more, I would have & I’m sure I’m not the only one. We all know the stories about living on pot noodles for half a term before the next portion of the student loan comes in…