Revenue, expenses and profitability. In this blog post, financial planning analyst @joey100 explains how we think about our finances, and how we’ll make money work for Monzo.
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Super read - A nice little insight into the financial thinking.
Interested to know what this will be:
If we can build great features that improve your financial life and convince you to go #FullMonzo, we’ll also be able to create new sources of revenue.
I’m assuming that will be through the marketplace?
Anyway, thanks for sharing @bea!
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Thanks for sharing. Clear explanation as to how you define the various aspects and how you hope to achieve them. This kind of transparency is fantastic.
Looking forward to hearing more about the new ideas for revenue you may have.
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This level of transparency is one of the reasons I was drawn to Monzo 
I haven’t yet taken the plunge and gone #FullMonzo (Joint Account availability was a big factor in that which has now been addressed), but plan to shortly…
Out of interest (and best laind plans aside), do your internal targets differ from those that you publish? Profitability by year end (as an example) is clearly a key objective. Is that aspirational, or are there implications in the event that it doesn’t happen? I found it surprising that you weren’t yet profitable, and if i’m honest, it concerns me a little with reference to my #FullMonzo comment above (FSCS protection notwithstanding, the hassle of my bank ceasing trading would be nightmareish and could have serious consequences).
Given the very “different” stance that Monzo has taken as a bank, I guess I question how much of what is done is experimental / acceptable to fail where (perhaps) a more traditional bank may be more cautious?
Not looking to be “that guy”; I am a huge fan of all that Monzo is doing for the record
Kelvin
Hey Kelvin, I can’t speak for Monzo, but on this point you raised (which is fair)…
I don’t know how long you’ve been following Monzo, but during their “pre paid” era (which was from the start to the end of 2017), each customer would cost Monzo quite a bit of money (I’m sure someone will be along to tell me exactly how much!).
However, they are in a place now where every new customer is profitable (woo), and considering the sheer amount of new accounts they are opening each day (which I still find incredible), I can’t see it being long before the profitable customers outweigh the non profitable customers.
Bear in mind… In banking terms, and companies in general, Monzo is incredibly young.
To achieve such success in such a short space of time is quite impressive - Even more so considering the lack of actual marketing that’s been done!
I guess the biggest “risk” from here is that something doesn’t go to plan, and one of the legacy banks come along and buy Monzo - Although Tom has already said they won’t sell, and have had many offers already!
I’ve been sceptical in the past, and I use a lot of different fintech banks (to try them out), but Monzo are probably in the best place right now to make this work better than any other (given the customer base).
As for #fullmonzo - You have to be comfortable - I am trialing it for the first time (salary/dd’s), because of the joint account - If, for whatever reason I don’t like it, I can always switch back.
But I’d certainly not be worried about the money side of things!
Just my 2 cents 
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Thanks @nickh
Don’t get me wrong, I don’t think for a second there’s any real risk of Monzo failing… I’ve seen enough of what has been done / is planned in the short time i’ve been following them to realise that they are an incredibly progressive / determined organisation. I wouldn’t have signed up if I didn’t think that! I also appreciate how new they are to the scene (as you rightly say - in company, let alone banking terms), and the success they’ve enjoyed so far is a testament to how accurately they’ve been able to tap into the (many) problems that exist in the wider banking sector…
The “risk” as you say is that something goes wrong / not according to plan. My question was really centred on that; in wanting to understand (if Monzo are willing to share) how fixed these targets are vs. the longer term objectives, and how critical achieving these are to any decisions to continue (or not) with Monzo. I sincerely hope they achieve them (and think they will), but when it comes to finances / banking I don’t think it hurts to be cautious, and to understand what you are getting in to
Re. your “every new customer is profitable” comment, I wasn’t aware of that (although had been following the threads re. debit card top-up fees, and the difference that disabling those is having on profitability). My reading of this report was that there was still some way to go in order for that to happen, which would be a precursor to overall profitability.
Again, thanks for the reply - I think all of this is healthy conversation, and a million miles away from what you could expect with any other banking organisation…
Kelvin
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Who would have thought a banking forum was the place to be hey! 
I think the big thing for Monzo is to add revenue streams to their offering (forgetting about the old customers who cost them money for a second).
Starling have their banking services (which they sell to the enterprise world). They also have a more active (although it’s still not great), marketplace, where they can make money.
I’m hoping Monzo’s marketplace is huge in the end - Tom has talked about how he wants Monzo to be the “hub” of all personal finance, so I’m hoping it turns out that way.
100% agree on the cautious comment - I’ve spent 2 years following Monzo before really using them properly, and whilst things can still go wrong down the line, I feel comfortable that I could switch in a flash at any point I felt uncomfortable.
Anyway, hopefully one of the Monzo team will answer your question, because I appreciate anything I say is just my personal opinion! 
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Just clarifying we aim to break even at the customer level by end of year, with profitability for the company being the next step
We believe this is achievable though to be fair there are dependancies on external parties, for example we really think the marketplace could make a major difference to customers’ financial lives but this is not something we can achieve totally on our own and so timing of building this with partners does come into play!
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Thanks for the clarification and info @joey100 
Much appreciated!
Exciting to see what the future brings…
Oh ok so this means new customers still aren’t actually profitable yet? Dont think it will be long anyways.
I agree, i think additional services and link ups like that with transferwise or the upcoming savings account one with skipton can possible add in some more revenue and speed this up. Onwards and Upwards!
Tom said on a recent Q&A that new customers are now profitable, so I imagine this just means that annualised profit per customer is still < £0, taken as an average from the entire user base.
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I believe the average for the entire user base means they are still loosing £5 a year on average. The more new customers they sign up will slowly reduce this though. Along with making existing customers profitable in their own right.
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How refreshing to have this kind of transparency from a bank! I will try to make bank transfers in future and avoid using cards for top ups! Clarity such as this helps customers understand the huge variety of challenges that you face in launching such an impressive bank. My only concern is the possibility of being ‘gobbled up’ by another bank/company in the future. Nothing is for ever so will deal with it if it ever haopens.
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£65 per customer per year
Although according to their 2018 annual report, the cost ‘to run one active account’ is now £15.
This has since reduced further. At a recent event they said the average cost of running an account was down to £5. New users are now running at a profit 
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Why do you think the company will be more profitable if their customers go full monzo?They earn just 0.5% interest from holding customer deposits.
Do they earn additional fees by paying out direct debits? Or is the thinking that there will be more cross sell opportunities with full monzo customers? I.e lending, marketplace products
Full monzo would mean salary is paid in or at least day to day spending/primary account.
More money in = more interchange income.
More money in = more money from deposits to BoE
Just as a starting point.
Also then you get monzo as primary account means person is more likely to use overdraft/loans functionality