Well if you only lend enough to get a person to payday, then perhaps they won’t pay it back immediately but if they don’t, they won’t be able to borrow again until they do…
(Again, I could be wrong, this is very speculative at this point).
More on the business model - this article from the FT 
doesn’t deserve a dedicated post because the summary that the author gives for the hurdles facing challenger banks don’t take into account Monzo’s business model (I’ve left my thoughts on that in the article’s comments 
) .
The trouble with ‘free’ banking for challenger lenders
But it does include a good case study that demonstrates what happens when a challenger bank gets their product right & the resulting willingness of customers to switch - despite the common argument that it’s hard to make them do so -
But the challengers have failed to find a compelling, distinctive customer offer and until they do the oligopoly will persist. In the modern history of British banking there has been only one such event, the introduction by Midland of free-if-in-credit current account banking in 1984. It was a disarmingly simple idea and the original 39 second advertisement was a chirpy little number with a catchy cartoon character, the occasional whoop for joy and a plain message. Nearly half a million customers promptly switched to Midland, eventually forcing the other big banks, which were still charging for handling cheques and issuing statements, to accept the challenge to their way of doing business and fall into line.
Here’s a quick update from @tom on the approach that Monzo’s considering for the marketplace from Twitter, where I’ve been bouncing ideas around with @zainjetha about whether Monzo’s marketplace will be completely open or whether they’ll take a more selective approach to offering products -
I’ve included the full thread for context, skip to the end to see Tom’s comments.
Always a pleasure @alexs
I think it seems clear that these integrations will be fully manageable from the app, which is cool.
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Thanks, the same goes for you 
Yes it looks like at least some of them will
That’ll be awesome from a UX perspective but I’m also hopeful that Monzo won’t choose an approach that could limit the accessibility of outside provider’s products to their users. Maybe they can build every integration into the app but I’m not sure whether it’s possible to achieve both outcomes, if they choose that approach. Fortunately there’s much smarter people than me figuring this out 
I think the marketplace will have to initially consist of products which will make a difference to people’s financial lives and the best in market.
So perhaps they will start with one of each, maybe nutmeg for investment isa, perhaps masthaven for cash isa, PensionBee for pensions because they are amazing, and then scale upwards by adding people like wealthify, moneyfarm from there, hopefully keeping it purely fintechs, at least until post PSD2 and then only add legacy banking products if they are actually any good.
Of course purely speculation on my part, but I also believe monzo have a duty to give access to products which will benefit people but also giving s fair degree of choice. A legacy bank ISA may not help anybody, unless it’s a really good one. So hopefully products are included on merit.
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I completely agree with your thoughts about the rollout of marketplace.
But ultimately, I’d like any provider to be able to offer their product / app through the marketplace, assuming that they meet the minimum criteria for quality & security standards of course. The user can decide whether it’s good for them or not. It’s not up to Monzo to decide which cases are valid & more competition between providers is good for the user because it drives down prices, encourages innovation etc. A ratings system can help users distinguish between the good & bad products / apps and long term, providers that don’t add value won’t survive.
As I mentioned a while ago in this topic, Monzo not filtering the apps that are available in the marketplace would avoid any potential for conflicts of interest, whether real or perceived too.
Tom has suggested that there will be some level of curation which is a good thing rather than it being a free-for-all.
Some providers do not have users best interests at heart, for example Wonga, and also Amigo Loans who charge a whopping 49.5% APR. Should these be allowed on the marketplace? Probably not.
I think there should be a degree of vetting by monzo, and that all providers should be subject to providing a good UX/ customer support. If they were market-leading this would be better.
I’m not suggesting a complete free-for-all
I could have been more clear here - I’m imagining something like Apple’s App Store Review Guidelines, which exclude things that Apple consider’s ‘objectionable content’ & copycat apps.
Monzo can set their own minimum standards, based on their values and then wouldn’t have to worry about ‘curating’ certain category’s of products - payday loans are a good example.
I never thought you were suggesting complete free-for-all either! But instead, a democratic marketplace which is about gives every provider a fair chance? Yes, the minimum criteria app store approach works, but then this opens up a floodgate in the literal sense of the word.
Monzo in my opinion will be the the leading current account, even amongst the challenger banks. I have a Starling account, and sure it is very cool, but is certainly not as refined as Monzo. And when all the Monzo users get current accounts, plus the growing number of users who join weekly, they will far outweigh Starling or whoever else joins.
If Monzo are a leading current account, they should hope to provide a best-in-class experience by creating strategic partnerships with different providers. So I think there will be choices, perhaps a few for each category - so for Investment ISAs there will be Nutmeg and Wealthify and Moneyfarm. And perhaps for ISAs there will be Masthaven etc. And for Innovative Fund ISAs and Borrowing I would assume Zopa, and Ratesetter, etc.
These are all good, reputable providers and each marketplace integration will definitely require work on both parties to set things up to work well, bearing in mind Monzo are the lead challenger bank. I doubt they’d want to have some half-baked experience.
Do I want to see NatWest, Barclays, Santander on there? No, I don’t. And do they want to go on there - I don’t know, but I doubt it. They’d rather sell their ISA to someone with a current account and a credit card who’s already trapped in. But if one of them offers a really good product and there is a profitable partnership for both, then I can’t see why it shouldn’t be available on Marketplace.
I think there are advantages to curation, and hopefully it will be kept to best-in-class providers, all of whom have spent careful time crafting a beautiful, elegant UI and service. They are going to want to to sit nicely within Monzo too, and Monzo have a reputation to maintain too. So I think the curation is referring to the number of different services which will be available, rather than the categories. Products should be featured on merit, ethicality, and benefit to consumer, or else anybody can comply for compliance sake. I think a lot is given away in @tom tweet saying ‘some level of curation’ and several hints through interviews have been dropped that it will look more like strategic partnerships.
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Interesting to see that Tail are building their integration, which will be part of the Starling Marketplace & has a standalone app, on Starling’s open API.
That doesn’t mean that Monzo will take the same approach of course (we know that they won’t, in some cases) but I think it adds credibility to my suggestion that it’s feasible.
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