Over in the Monzo in 2021 Wish-List topic, number three on my list was:
I thought it might be interesting to take some time out and explore what I mean by that. So what do I mean?
Monzo was designed (originally, at least) to be a financial marketplace. The digital location where all your financial information comes together in one, easy to use place. And, looking at the budgeting poll, it looks like there’s a desire to see things like net worth in the app.
The marketplace hasn’t really become a thing. The was some minor flirting with energy switching (I think switching to Bulb might still be in the app), but that seems to be more like an arrangement with one company. And, after initial experiments, Monzo decided that integrations needed to be deep, so along came savings pots. Partly due to the current economic environment, these haven’t really taken off - interest rates are low and they seem to be withering on the vine.
Like many things, it felt like Monzo didn’t really invest enough time or effort in either of these. The energy was too basic and not really taking advantage of the data held in Monzo; the savings pots are arguably too deeply integrated. The objective has to be to move to a commoditised set of financial services products that can be hooked into an app by standard interfaces. Instead, savings pots seem to necessitate bespoke agreements and integration - and yet have customer unfriendly feature like delays in withdrawing money. And, while I absolutely get the need to make money, I’m not sure that the top-slicing of interest was ever going to be effective.
Financial services are becoming commoditised. I think we’ll end up seeing apps that provide the customer experience, then a whole bunch of different savings (and current account) providers. But they’ll be a bit like electricity suppliers - they all do the same thing, so it’s just inertia or cost that keeps you with the same provider.
Monzo could really drive this change. There are lots of financial service organisations that would love to tap into 5m potential users. And Monzo isn’t (wasn’t?) building a vertically integrated model. So savings providers (like regional building societies) shouldn’t fear them. But I digress - I’ll get onto the commercials later.
There are a few key to cracking this, I think.
From a technical and product perspective:
KYC: firsly, you want to be able to open accounts with third parties from the Monzo app. So that means a mechanism to share/delegate/assure KYC with other banks and financial institutions.
Open Banking (Or Open Finance) Plus: we need a better set of open standards and integrations than exist through open-banking. Stuff that brings in all history, that provides hooks so that instant notifications would be possible and so forth. This would abstract the back-end banking services and allow different apps to service them natively; in practice, this would allow the Monzo app to display other accounts as natively as it does its own.
In-App Templates: if we’re commoditising financial services, the Monzo app will need a (small) number of standard templates to represent financial data. A savings or credit card account, for instance, might use a similar template to the Monzo current account (a balance and list of transactions). Share-trading apps might need a different template (graph and line items for shares held?). There will be others.
Better Use of Data. With user consent, let the Monzo app mine your data for you. Tell you how much you’re spending on bills, how much on your mortgage, and the rates/performance on your credit cards, savings and investments. Give me a regular report on their competitiveness. Let me switch with a tap.
Support It’ll be essential to be clear about where support is for different products. So split out support for the Monzo app from support for the Monzo current account. And have separate chat buttons (or buttons to call customer services) from other providers in Monzo. Making it easy and straight-forward.
From a commercial perspective:
Monzo needs to make money. So do other companies. And customers want a good deal. This means that Monzo should not top-slice interest rates: instead, suppliers should pay Monzo an introduction fee and an account servicing fee. The market already pays out introductory fees (that’s how Monzo makes money out of the Bulb switching) - and I’m sure a large swatch of the market would pay £1/month for their savings account to be serviced in an app they don’t need to develop or support.
Creating a platform and don’t be greedy. The app stores have shown how profitable this is. Target older organisations which provide good financial services but don’t have apps or digital nous. I’d start with regional building societies. Keep fees low and start early. And don’t be afraid of integrating other current accounts into the app - especially if those organisations will pay you £3/month/user for the privilege. But start slowly and get a critical mass. And keep the standards open!
Think about an ecosystem for Fintech: when these things get aggregated, think about what can be done for paid accounts. Imagine a paid account that gave you the features of Freetrade Plus, Monzo Plus and Flow in one package. Or a separate offering that let you buy trackers or Vanguard style investment products in the app.
Position Monzo as an identity provider. If Monzo can crack #1 (KYC), then imagine a basic proposition where you can ‘login using Monzo’ for websites alongside Google and Apple logins. But unlike those providers, Monzo could guarantee identities, allowing for one-click opening of other services that require identity. And that’s another revenue line.
What does that all mean to me as a user?
- Basically, you’d have loads of products in the Monzo app that you could open with one click.
- You’d be able to see these like connected accounts - but better than those you’d be able to service then natively, get notifications and contact support for those companies, all from the app.
- Monzo would get a bunch of additional revenue streams and - in my view - cut a profit very quickly.
Phew, that’s a lot to get out. I’d tag the CEO, but I don’t think he knows this place exists. Maybe I should write to him?