So how will Monzo make money?


(Justin Hunt) #1

Hi Guys,
Whilst i’m very excited about the potential offering the Mondo will deliver. I’m guessing at some point someone somewhere is going to have to cough up for the salaries and development time of all the awesome staff that will be working at Mondo.

So assuming that the crowdfunding will NOT be bank rolling the business forever, How will Mondo make money?
The natural extension to the question is of course what charges and fees will I have to agree to in order to have my sexy Mondo account?

I’m happy to pay, but would be keen to know how much

Justin


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(Tristan Thomas) #2

Hey Justin,

Crowdfunding 4eva! :wink: But seriously, the plan is to make money from overdrafts – offered in a clear, transparent way to customers. We are really keen to avoid charges and fees, especially hidden ones. @tom wrote a blog post about this a few months ago if you’re interested: https://getmondo.co.uk/blog/2015/10/22/the-hidden-costs-of-free-banking/


(John Mapley) #3

Plus bear in mind that banks make money by investing (and loaning, etc) the money they hold on behalf of their customers. It looks like Mondo are already planning this. From their FAQ:

What will you do with my money once you’re a bank?

In year 1, a very small proportion of your money will be lent to private individuals in the form of unsecured personal overdrafts. The rest sits in cash at the Bank of England. In the future, we will do more personal lending and invest some of the money in UK government bonds.


(Thomas Redstone) #4

Even at a fairly small scale, Mondo’s costs should be way lower than a regular bank, just holding all that legacy IT together costs a fortune, the fact that so much of old bank’s infrastructure is written in programming languages older than the average programmer means the developers cost a fortune!

By making a clean break, all of that is left behind! Costs are lower, development is faster, and customers are happier!


(Caleb Wong) #5

Seriously, when will the next crowdfunding be? I missed the first time as it was too quick. Or any special deals can be given to active :mondo: forum users :stuck_out_tongue:


(Richard Bairwell) #6

Don’t forget that Mondo also makes a small amount from each transaction due to interchange fees. Merchants are usually charged ~20p per debit card transaction they accept (credit cards are usually around 2-5%), of which a proportion will go to the merchant’s account provider (such as Elavon or WorldPay), some will go to the card network (Mastercard) and some will go to Mondo. It’ll only be pennies per transaction, but it’s something (especially at volume).


(Matt) #7

Surely Alpha/Beta members should get first shout at any further crowdfunding round?
I heard about Mondo because of the crowdfunding last time and didn’t have enough info to make a decision in time (because I didn’t have time to check it out) but managed to get on the waiting list for cards early enough to get one super fast and have been loving being a beta member. It saved me a bunch in overseas fees compared with my regular bank on a recent trip to the USA and even if it just remained a pre-pay card with o% foreign fees I’d be a devout user. The prospect of bringing all these features and design skills to my everyday banking is, well, more exciting than I ever though banking could be.


(Jack Saxton) #8

First post :slight_smile:

What is the view on generating revenue from anonymised user data? The new Foursquare business model means that it generates most of it’s revenue from selling check-in data to businesses, and I’m sure Mastercard/Visa must do something similar.

Jack


#9

With a banking license you’ll presumably be able to create ‘new money’ as loans and mortgages like other banks so will the BofE impose a high reserve ratio on you for lending in the first few years?


(Paddy) #10

It has been some months since I have seen any posts as to how Mondo plans to make money…from what I gather the target market is the younger / student set and the initial product offering is over drafts …Banking is a case of managing risk… how does Mondo plan to manage risk (OD to student market) where students have no reliable form of income and have student loans etc …confused how this all stakes?


(Alan) #11

Hand in hand with making money from overdrafts would be to attract older more affluent customers with attractive savings rates that were, say about half the percentage rate charged for overdrafts. This is something the High Street dinosaurs seem incapable of doing.

Keep both ends of the spectrum happy!


(Paddy) #12

Yes I understand that it is good to have the right mix of client but they are not ‘mobile’ users yet so how do you attract them…a better interest rate is no enough if you cannot get them registered as clients in the first place …what is the client acquisition strategy …clients that have money or assets against which risk is offset when lending money


(Paddy) #13

Don’t get me wrong, I am excited about the fact that traditional banks will have competition for their business but I have seen nothing yet from Mondo / Atom and any of the challenger banks that explains how clients are acquired


(Paddy) #14

Anyone can slag the competition on what they are doing wrong but how do you plan to register customers and manage risk?


(Alan) #15

“They are not mobile users”!

Reminds me of when I first got my Concessionary/Free Travel Pass (in Scotland, unlike Englandshire, you only have to be 60 to qualify).

Phoned to book my ferry crossing and when said I had a ‘Highland Card’ they asked if I needed any help getting on the ferry!

I replied “No thank you, I’m going snowboarding on Ben Nevis so I think I can manage”!

Assumptions are dangerous. I understand one of the largest groups of contactless card payment users are the 80+ age group …


(Colin Robinson) #16

Says who?

60+ here, coding since 1979, switched to first direct when it launched which was pretty revolutionary back then - “what, no branches?”.

Spreading the word to all my friends about this new thing :mondo: coming and most of them want in.

Don’t write us oldies off just yet - 60+ is the new 40+


(Paddy) #17

Touche …point taken


(Vincent Breslin) #18

Hey @richyb, do you know where we could find more info on this? Thanks!


(Richard Bairwell) #19

Not that I can put my hands on atm: but as a merchant I’m charged ~20p for “debit card” transactions - some of that will go to my merchant account provider, some to the card network (Visa/Mastercard), some to the card issuer provider (in Mondo’s case, Wirecard) and then a small bit to the card issuer. We’re only talking a couple of pence (if that) per transaction (and some transactions, such as atms, may actually have charges) but that is how the pre-paid debit card market makes some of it’s money (not all of it by any means, and the small money they make per transaction may be countered by infrastructure costs).


(Alex Sherwood) #20

MasterCard publishes a handy explanation of interchange & how it works, along with the US rates here. The EU rates are listed here.