What features in a Monzo app would you be willing to pay for?

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81

Putting aside the fact that we live in a digital world and that everything requires some level of software

The distinction for me is:

Non-software

  • Loans
  • Overdrafts
  • ATM services
  • Cheque services
  • Bank transfers
  • Credit cards
  • Savings accounts
  • Investments
  • Direct debits
  • Standing orders
  • International payments

Software

  • Payment categorisation
  • Bill splitting
  • Pots
  • Payment notifications
  • Freeze/un-freeze cards
  • Budget analysis
  • Digital receipt integration

To expand on my previous post…

Monzo is first and foremost a bank. Those of us that started as Alpha/Beta customers know that Monzo’s (Mondo’s) goal was to prove a concept and become a registered UK bank.

What sets Monzo apart is that it doesn’t have branches. It functions purely through an app. Those software features are the core proposition for Monzo.

The core proposition for the legacy banks was that you had a brick and mortar branch you could walk into and speak to somebody, or a physical place to pay in your cash/cheques.

Monzo does not have branches and therefore does not have the huge associated overheads.

Monzo is transparent but let’s not pretend that Monzo doesn’t already charge large fees for their services. My Monzo overdraft is half the size but costs double my NatWest overdraft and NatWest don’t charge me to pay in cash or cheques.

The problem for Monzo is that they can’t get enough people using it as their main account. They aren’t getting enough deposits to make money off of. And they aren’t providing widespread access to overdrafts and loans which are a huge income source.

A company like Strava (a freemium/paywall app/service) is a software company. They don’t sell bikes, they don’t offer bike servicing, they don’t provide bike insurance. The only way they can make money is to show adverts or ask people to pay for the service. That is understandable as it is their only revenue stream.

A company like YNAB (a freemium/paywall app/service) is again a software company. They don’t have access to your money and they don’t provide loans. All they can do is use software to analyse your spending through bank accounts held with other companies or could make commission on recommending credit cards and loans.

Monzo has many more revenue streams available to them in their capacity as a bank. Charging for their software is hard for people to get behind.

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82

Maybe not, but what classifies as an “essential feature” is very subjective. Are merchant logos an essential feature? Instant notifications? Powerful search? Goals on Pots? etc etc

Edit: dark mode? :new_moon_with_face::joy:

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83

It’s my belief that the average consumer isn’t comfortable paying for software anymore.

Nowadays, consumers have an expectation for free software - typically the software (and even services, where there is no direct cost to the business) is subsidised by other means (often unbeknownst to the user). Consider the internet broadly, Google’s services, social media, content consuming etc. Consumers just aren’t used to paying for it anymore.

Conversely, consumers are okay paying for services that there’d know has a direct cost to the business or there’d be a cost by the established alternative route. For example, music subscriptions, tv subscriptions. At a push your average consumer might buy MS Office out of necessity or not knowing alternatives exist.

It’s of course a totally different story for businesses or entrepreneurs too. They expect to pay for software like Slack, MS Office, AWS etc.

I fundamentally believe that opening up this can of worms and reducing the potential proposition value of Monzo - the free bank account, is a mistake.

By the very nature of what the business will eventually become - when every variable is ultra-optimised for conversion, Monzo will be tempted at every turn to question: “can we get away with adding this feature to our paid account and it not effect sign ups/NPS to increase it’s proposition value?”. It’s a slippery slope, and ultimately I believe it’ll no longer be a consumer friendly bank.

Monzo has built enormous trust with its users. It’s community led, feedback driven, transparent and frankly just better. But that community spirit, and by extension the trust, will be diminished if people think they are being nickel and dimed.

With regards to the rest of the package - is the non-software value, whether it be insurance, airport lounges or otherwise, in Monzo’s eyes; going to be so lukewarm that they have to use features to convert?

If Monzo does commit to it’s rollout and it is a mistake, the repetitional damage to consumers isn’t something you can repair very easily - I suspect a sizeable portion of their existing 3.1M customers will not believe Monzo’s vision and path is the one they had been led to believe it was.

So I’d urge Monzo to consider getting the best deal they can on insurance, airport lounges or whatever else they’re considering - and test the water first.

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84

Not sure about this - Notion & 1Password are examples of consumer software that people seem willing to pay for - but it’s certainly rare and I agree with the rest of the post.

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85

I accept that data storage and compute costs for additional quasi-banking features costs Monzo money that cannot be indefinitely funded by VC. I’d pay a small annual fee for:

Itemised digital receipts
Working out who bought what on a family itunes account is horrible.
Currently only a handful of retailers offer this integration mostly for perishables

Utility Value Checker
Find the best value utility rates and switch us automatically - Monzo could take a share of the savings made.

Automatic Manufacturers Warranty Registrations
It’s so frustrating to be told you never registered for the manufacturer’s warranty.
(requires: itemised receipts)

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86

Can’t think of any features I’d pay for at the moment. Most banks are paying their customers to use their services but I wouldn’t rule it out if something decent and by decent I mean it needs to be a lot better than the Monzo Plus offering

87

I wouldn’t generalize that to all customers.

One of the things that attracted me to Monzo in the first place (both as a customer and investor) was that it seemed to have a non-traditional vision to what a bank could ultimately be. I was and still am interested in seeing how that plays out.

The corollary of the vision is it will need different revenue streams than traditional banks, so I for one have no problem in seeing Monzo try non-traditional approaches (for a bank) for generating revenue. That might be through app add-on features or it may be something else we don’t typically associate with a bank.

There would have been a point sometime in the past when banks selling packaged accounts would have seemed radical. Now its normal.

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88

I do agree with you re the offering and what they should charge for, and I think we’re mostly saying the same thing, but I don’t think a software/non-software distinction is a good way to explain it.

Monzo is a software company, most of their employees are software engineers, and their software is what distinguishes them from other banks, so it is rather fundamental, and saying they should not sell software doesn’t really work as most of the value they generate is software (even when it is presented to users as a financial product). Money itself is mostly software nowadays!

The question is rather what sales model they should pursue. Should it be transactional, charges for financial products like loans, savings etc, subscription for premium features (software as you put it), or some mix of those.

Software companies and high growth companies also have a range of business models - transactional for stripe, transactional with a dash of subscriptions for deliveroo and amazon, purely subscription for spotify, netflix. I don’t believe a subscription model with premium features bundled is a good one for a bank as the main source of income, but maybe it will get them to profit, that is obviously what they’re hoping for.

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89

I am going to reiterate some of the points others have made but your comparison is not a good one.

First all companies are backed by capital - venture or otherwise - it doesn’t make any difference.

Monzo is a bank that happens to be delivered via app. Banking is and should be your core competency.

Similarly, many of the other firms you mention use an app to interact with their customers but that doesn’t make them primarily software development firms.

You need to be careful making such claims - they are to an extent misleading.

Legacy banks have had lots of legislation imposed which limits the level of fees they can now apply - and Monzo does charge some fees you could call extortionate such as charging you to pay in cash.

I hate to disillusion you - and I know this forum can be an echo chamber praising Monzo - but your core product isn’t currently orders of magnitude better than other banks at the moment.

This - Monzo need to stop thinking MVP is good enough into many cases and also implement some basic features you are still missing.

Again, the misleading comments about charges. It also takes time to build a profitable loan book - and Monzo has been very slow/conservative in rolling out lending products.

The way to do this is simple - build features into the App - make them available to everyone - and use them to encourage people to switch to Monzo and use their accounts actively.

If you build app features that only a few will pay for, Monzo will not be self sustaining - you need other products that have widespread willingness to pay for (Plus, loans, credit cards, mortgages etc)

If you put something behind a paywall and it’s popular - arguably it should have been free core functionality - and competitors will add a version to their own apps (for free)

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90

This is blatantly false.

91

Do they have more customer support than engineers, is that what you mean? If so I concede they may well have more support staff but I do think they are best described as a software company and this is their main differentiator.

92

Definitely, disposable cards would be a welcome addition to Monzo, especially to combat to (unjustified) concerns about Monzo’s security - from a PR perspective I suppose.

Also, a loyalty scheme; either a bonus on-top of one that would be open to all, or an AMEX style where only paying customers have access. Personally, I’d be happy with both, but an AMEX style is very unMonzo and wouldn’t appeal to the market Monzo services; this also stems to an argument that Monzo is suppose to be a platform for all to enjoy, as apposed to an exclusive club.

Furthermore, Monzo’s features, such as budgeting and getting paid early, don’t exactly serve the kind of customer that would be looking an exclusive club or membership, thus I feel it would probably be unwise to make a Monzo loyalty scheme simply for paying customers, but offer a bonus rate (or bonus offers, akin to the new Sainsbury’s new nectar app) for paying customers.

93

I’m struggling a bit with this all, to be honest.

My instinctive response is a visceral “no” to Monzo becoming a chargeable product. But if you break it down, I think there are areas where it might make sense and areas where it doesn’t.

Let’s start with where it doesn’t. The survey published by @tomdavies in the fresh start post had a mock up in it that had three options: Monzo Pro, Monzo Premium and Monzo Basic:

I find this fundamentally uncomfortable. By calling the current account “Basic” anchors a number of things: in customers’ minds, they aren’t getting the ‘full experience’ (but maybe that’s the point?); in Monzo’s mind, it cements the thought that the ‘normal’ bank account is a basic one. That it isn’t the place for advanced features. Or new features. So the basic account becomes more basic over time. And new features end up in the paid for plans.

This, to me, is the freemium model. This is what I don’t want to see. Monzo might be both a tech company and a bank, but there’s a different emotional model between (proper regulated) banking and, say, Spotify.

So what do I think works? I’d like Monzo to move towards a marketplace model for extensions to the app itself. I’ve proclaimed war on toggles - because I don’t think the app should become cluttered. But if someone has a particular advanced need, then I don’t see why they shouldn’t be able to buy it from an app store. The example of YNAB is an interesting one. I have no need of that in the app - I might try it if it were available, but it’d probably just clutter things up for me. But if there were an app store to allow folk to buy extensions, then I think I’d be down with that. And I think it should also be open to third party developers like @Sherlock.

I have no data to back this up, but I suspect Monzo would make an absolute fortune from this model, if they had a bit of faith (and got the regulator on board).

(If anyone’s interested, I set this out in more detail over here).

But this doesn’t really answer the question of paid-for features in the short term.

On balance, I’d say I’m against it. Indeed, I worry that “Monzo Basic” will be seen to be pre-paid like card - and make it harder to convert folk to go #FullMonzo - as it’ll be presumed you have to pay for that. And that Monzo Basic will be seen as your coffee and transport card.

I’d be willing to pay (maybe) for a packaged account. We’ve mentioned FlexPlus a lot. If Monzo Pro offers similar value, I might go for it - but if I feel like I’m being pushed down the the Monzo Pro route only because features are getting pay-walled, rather than it adding extra value to me, then I’ll probably CASS elsewhere and just use Monzo for spending money. Which, ironically, will relieve Monzo of the revenue that I’m currently bringing in.

This does all feel rather short-termist. These things are not mutually exclusive, but what about things like offering those who are Full Monzo (and therefore profitable) a choice of card colours after a year or something? Or the ability to buy into that option beforehand as a chargeable thing? Basically, find a way to drive up engagement to go Full Monzo - it feels like that would be a better route to profitability surely?

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94

That’s the crux of it - well said. The current thinking around monetising through some sort of “Plus” offering is very short-sighted. Getting more people to pay their salaries into Monzo and leave more of their money with Monzo is absolutely the way to become profitable in the long term.

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95

I think the difference here is that 1Password have no other revenue stream. They exist purely to sell a password manager. They are a password management company.

Monzo are a bank and have huge potential revenue streams for being a bank and holding our money. In return they build attractive software features to lure more customers into depositing their salaries etc. The more of these software features that exist behind the paywall the fewer people who will deposit their salaries.

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96

Couldn’t agree more. It seems shortsighted of Monzo to think of putting any “feature” behind a paywall.

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97

That’s definitely something that Monzo needs to consider but their interest’s are aligned with customer’s there. They’ll do whatever makes more people deposit their salaries & more people will deposit their salaries if they’re getting value from Monzo.

So it’s not a concern for me, I’m confident that they’ll do a good job of managing that.

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98

Fair point. My post was actually first written for the Legacy Monzo Plus Issues thread and someone asked what I felt were “software” and “non-software”. However this was off track with the thread so I moved the post here slightly out of context.

Your description is good, and as I interpret it, is making the same point I was trying to make.

However;

We’ll have to agree to disagree on this. Monzo is first and foremost a bank. It relies heavily on an app and software but it has been appointed by the Bank of England as a bank. Is Google a technology company or an advertising company?

This is the point I have been trying to make (perhaps not always that clearly). Get people Full Monzo by offering amazing advanced features that other banks can’t do. Adding a paywall reduces the impact of those features are short sighted.

Completely agree!

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99

So this strikes me as the key thing. My fear around the ‘freemium’ model is that it drives down the level of the basic offer and instead directs customers towards a paid for model. That would then be regressive and would hurt vulnerable customers the most.

But Alex’s point about alignment of Monzo and customer interests is a good one. And my concerns aren’t necessarily binary: it’s possible for Monzo to move to a tiered (Basic/Pro/Premium) model at the same time as expanding functionality to attract salary payments to Monzo.

Ultimately, if we have to go down this road, I’d like it to be reviewed when profitability happens. Don’t sit on the profit and look happy - stay competitive, make Monzo Pro free for everyone (assuming there’s still profit without it) - keep moving forward, keep challenging…

P.S. I don’t think the tech company / bank distinction is a helpful one. Every company ultimately needs to be a digital / tech one in the current world. And, again, not binary. You can absolutely be both.

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100

Could be done on a pack basis (For £x you get all of this functionality) or on a per-feature basis. Taking inspiration from the App Store here, they make it simple and easy to understand IMO. Free apps (like Flux) could exist too.

First off, I appreciate the shout out! But I also totally agree, that relationship if designed properly benefits in both directions.

Developers can create behaviours that interest people, they can get a monetary kickback (small % on sales) and Monzo gets more flexibility in their core product that they don’t need to maintain.

Though this does introduce many more complexities for instance what interface they give developers (while keeping things secure and compliant, given 3rd party devs are not AISP/FCA monitored). This could be through a new API which means Monzo does all the heavy lifting/storage and apps have much less information but can more easily integrate with other services. Woo liability

There’s also the control/audit of third parties. Limiting the amount of duplication which increases confusion, while allowing freedom and not enabling a couple early adopters to monopolise the marketplace.

This is a huge ask of Monzo, and while I would absolutely love them to do this, I just can’t see it happening.

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