Rethinking the Marketplace / Integration with other services

Monzo Chat
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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?

The Past

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.

The Future?

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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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:

  1. 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.

  2. 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!

  3. 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.

  4. 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?

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I’d be interested to know how recent senior management changes have affected the product vision. Has the vision now shifted away from financial hub and toward traditional bank? If so, is it a small shift or a large shift?

I don’t think they do top slice the interest rate. My understanding is they charge the provider a % fee and the savings provider can provide whatever interest rate they want to Monzo customers. If the provider decides to lower the offer to the monzo customer (compared to what they offer on their own platform) that’s up to the provider.

It seems the main difference in your suggestion is a fixed per customer fee from monzo to provider instead of a percentage fee.

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I think this is to be played for. Tech does commoditise stuff, but the big banks have every incentive to stop that happening. It’s a game of chess and I’ll be interested to see what happens. I think that there momentum is behind the concept, though - if there’s anyone focused enough to make it happen.

I see where you’re going - and there are signs that Big Tech is moving in that direction. I think we’ll have more certainty this year: as Facebook, Amazon and others start to get even bigger (and even emulate some of the trappings of nation states with digital currencies and the like) then I suspect we’ll see a tipping point: either regulators will accept their inevitable growth or they’ll be split up or otherwise curtailed. I think the latter is more likely right now - but that’s a whole different story. Where Monzo’s mission fails, I think, is in the idea of becoming global. Banking, perhaps more than anything, is heavily regulated and is cultural. Whereas Google can offer the same service everywhere, Monzo can’t (easily). And I suspect Big Tech would like to stay way from heavy financial regulation. But I don’t know.\

So I want Monzo to be both broad but deep. But I think this alone is a deeply unambitious. It probably describes Starling quite well - but I think unless Monzo gets into rethinking the industry then it’ll always be nice but a little bit meh.

I think this is more or less semantics. The point I was making was that the customer should lose (or perceive that they lose) out. But I think that’s what happened here: Monzo has taken a cut of x% - and the same providers seem to offer the same product but with the addition of x%.

Not really, I think it’s more complex and nuanced than that, although I can see why it might come across like that. I think that some providers might pay to be in the Monzo app store. If there was this deep level of integration, which meant that they didn’t have to develop and support their own apps, then they could see that being financially advantageous. Take a current account offering from, for example, Yorkshire Building Society. They used to offer one through their Norwich and Peterborough brand but, as I understand it, gave it up because it cost too much to service and they’d need to massively invest in thing like an app. My hypothesis is that if Monzo were to give them the front end, and all they needed to do was hook into a few APIs, that might well be worth £3/user/month. But I don’t know - it’s all supposition. I think for the less taxing integrations, you’d just be looking at an introduction fee (but I accept that probably wasn’t all clear in my original post).

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Me too! I think I was, with hindsight, slightly unfair on Monzo in the way that I phrased that. I suspect that there’s a period of reflection and strategising* going on, which is fair enough. I do hope we hear from the new management soon, though. I suppose I’m a little frustrated with the radio silence of the new team, unclear on their direction of travel, and unsure what their commitment to Monzo values and the community is.

*I can just about live with strategising. But if I get wind that Monzo has been dabbling in ideation then I’m CASSing away immediately.

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I’d be really interested in a Summer 2021 Investival, even if it had to be entirely online

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Hmm, I seem to have a comment in this thread “awaiting approval”.

Wonder if I said a naughty that caught a filter somewhere?

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Absolutely agree with this. :raised_hands: So many great threads and discussion points, which I hope Monzo are reading.

On topic mind; I don’t know if I have too many opinions about Monzo as a Hub yet, but the one I do hold, is that I need/want it to be a near seamless transition between providers.

I really did wish Plus/Premium would crack that a bit better than they have - but for me, the best version of that would be a “monzo like” experience with those other providers. Maybe thats the “Sign in with Apple” like approach that @N26throwaway mentions, or the Monzo flavour of that.

But the version that I don’t like is what you get in Premium, with “Great, here’s your policy ID, bye”. I really thought they had a good opportunity to properly bundle a product into the app there, and I think it’s a shame it wasn’t taken.

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I know that @AlanDoe has been playing with some filters to stop folk from posting their phone number, email address or personal data. But don’t worry - you haven’t done anything wrong (and if posting too much is a crime then I should probably be banned).

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For the record the idea of being able to see your ‘financial life’ in Monzo is definitely not dead. We wouldn’t have spent time developing connected accounts (& we wouldn’t have lots of plans in place to develop them :see_no_evil:) if it wasn’t.

There is a huge amount of work that goes into onboarding different suppliers, and sometimes we get quite far into the process and for whatever reason it falls through. There are also ongoing commercial relationships to manage, which also take time.

I’ve said it before and I’ll say it again but the focus we’ve had on our product and our goals has never been stronger. You’re going to see lots of amazing stuff in 2021 (I promise).

Also, next time TS does a Q&A at All Hands I’ll ask him if he wants to come say hello on the community on your behalf!

P.s thanks for the threads as always @Peter_G plenty of food for thought!

I’ve shared the thread with our product team too :pray:t3:

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That just makes the challenge even more fun :rocket:

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Sadly, I cannot recall the last time I was excited by a Monzo release :thinking:

All the hype building up to each of the recent releases has turned into :man_shrugging: , for me, when product seen.

Each to their own though.

Guess my Monzo account does just what I want it to at the moment, so perhaps my expectations are non-existent, thereby nothing to fulfil :man_shrugging:

Not into micro-managing my financial spend any more. My expenditure is always less than my income.

Perhaps the pandemic has just numbed my wishes and wants for the time-being.

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I wish we could develop something exciting for everybody, but sadly we have to prioritise :hot_coral_heart:

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I forgot to come back on this earlier! I’m sorry if I wasn’t precise, but I definitely don’t think that Monzo as a single KYC processor for the industry is good or desirable.

I was trying to say more that the platform model could / should mean that the platform holds KYC. And passes it onto others or vouches somehow for an identity. I’d hope there would be more than one platform, otherwise monopoly issues apply.

I was being a bit expansive in my thinking about Sign In With Monzo. We know that the world is rapidly digitising, yet there are still times folk need additional proof of identity online - this is why the government is consulting on a digital identity and attributes trust framework.

The potential vision here would be to look to Monzo as a digital identity provider. That could help with both the KYC issues for account opening referenced above (indeed, it might be the only way to do it in the future), and also potentially open up other revenue streams - ideally, a pay per identity verified model, not a data aggregation and sales model.

Does that make more sense?

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Thanks Dan - that’s reassuring!

The cynic in me wonders whether it’s because of real drive and vision in this area - or because it’s a nice revenue generator for paid accounts. But I suppose it can be both (or neither, actually) as long as I enjoy and value the product.

Thank you! I think it’d be a lovely touch. Perhaps we could do a coral-crew hosted interview session?! :hot_coral_heart:

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I do think this is a problematic factor in how Monzo is/has tackled budgeting - and one I hope gets done differently in the future (and I’ve said lots of that in the dedicated “make budgeting better” thread).

But I think it’s a shame that, in the Monzo universe, “Budgeting” has almost become synonymous with “cutting down costs” or “saving money”, when in reality it could open more doors for more users as “Making a plan for my money”, which is so much more interesting and empowering, IMO.

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Yes, exactly this!

Apologies if this sounds a bit pompous, but the words we choose for things often our parameters of thought. That’s why I got a bit caught up over here with terminology about what we call Monzo (and why all new starters at Monzo should have it drummed into them they’re building a finance-hub).

As you say, we need to think carefully about the Budget word. I really like the “making a plan for my money” line instead. :hot_coral_heart:

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Excellent, I think we’re violently agreeing! :joy:

It’s really a topic in its own right, but it struck me as one of the things that would be necessary but not sufficient for the sort of thing I was imagining: sophisticated digital identity (or KYC) that could open additional accounts + advanced API with hooks for instant notifications and stuff that’s not in open banking = :hot_coral_heart:

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Thanks, Dan - that does sound like a difficult overhead to manage.

I suppose, put another way, I was looking at how to commoditise or take the heat out of all of that from a Monzo perspective. You need to get to a self-sustaining platform (or flourishing garden) without spending all of your time watering the plants. I suppose I was trying to envisage how to get there (and why I thought that savings pots might actually be too deep an integration).

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This is exactly where we need to get to!

The thing I don’t know - and I’m keen for insight on - is when does this approach the FCA definition of financial advice and therefore falls into a different regulation category? I’d worry a bit if that was holding things back - I think as things move on there will need to be a different approach to regulating this sort of thing. It’s important to protect the customer, but also to make sure that regulation remains contemporary.

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It’s easier to spend less. It’s tougher to work out how to spend better.

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