Introduction  

• Monzo is one of the coolest and, in my opinion, most interesting FinTech Companies around at the moment. It’s only been around for ~2 years, and only very recently had to change its name from Mondo to Monzo (due to copyright infringement), but it’s got a significant and growing audience.
• If the term FinTech is new to you, or you don’t understand exactly what it is then I suggest you check out my post on it before reading on, you can find it here: http://jablifestyle.net/2016/07/14/introduction-to-fintech-psd2-blockchain/. It will definitely help set the scene for the rest of this piece.
• At a fundamental level Monzo is a mobile application focused on providing a significantly improved current account banking experience for its customers. It embodies the idea of enhancing private banking experience through technology.
• At the moment Monzo is a pre-paid card, and only very recently got it’s banking license, yet in March 2016 it raised £1m on CrowdCube in 1 minute 36 seconds!
• However once fully functional – much more likely after it was granted a restricted banking licence by UK regulators in August 2016– it will provide a fully-fledged current account and will even offer short term clever bridging loans to prevent going to overdraft.

Why is there a market for Monzo? 

• The market of offering current accounts in the UK is dominated by a small number of big companies (think RBS, Barclays, Santander, Nationwide, HSBC), it is an old market with lazy incumbents, therefore the perfect target for a FinTech start-up to disrupt.
• Monzo takes the view that the whole business model for current accounts is based around, and obtains its profits from, punishing fees and charges which are often completely disproportional.
• What this means is that it is in the interest of the large incumbents for you to slip up, if you slip up then you go into your over-draft and they make money from you, it’s a rather immoral business plan when seen from this perspective.
• When you hit zero on your account with Monzo, you can set up for your account to be automatically turned off and not spend any more. To a lot of current account holders this will seem evolutionary. There are a very large number of people who are highly disillusioned by big banks (think of ‘banker bashing’) and these types of features make large number of people excited to jump ship and start a fresh.

What other features are there? 

• Whilst the automatic spending freezes to prevent surcharges is a central feature there are some more really cool features of Monzo.
• Firstly, it’s a technology driven current account. The iPhone app (android is coming soon, apparently September is when it’ll be released) is far superior to any of the other high street banks and is perfect for people on the go, are tech savvy and want to easily engage with there money.
• Secondly, it tracks your location. I know from personal experience how unbelievably frustrating it is when you travel aboard and your bank blocks your card, often even after you’ve told them you are going! If you are traveling abroad with Monzo it will welcome you as soon as you land and ask how long you’ll be in town for. No more having your card blocked every time you travel.
• Thirdly, it requires much lower cost to function, therefore needs to charge customers less. All of the big banks on the high street have highly complex and legacy IT systems and have to spend billions on maintaining and sustaining them. On top of this they also have to spend plus hundreds of millions pounds maintaining their high-street branch networks. Monzo has neither of these things to worry about. This means they are able to run at 1-2% of the cost of a traditional high street bank.

Negatives Or Drawbacks? 

• As you’ll have seen from the above Monzo is a really interesting and growing company and I honestly think they will continue to gain traction in the market over the next few years. However, there are a few potential negatives or drawbacks you should be aware of;
  • Monzo are a newcomer to a large and tough industry, with significant barriers to entry. Metro Bank had to work extremely hard for their FCA banking license and were the first high-street bank to be granted such a license in over 150 years.
  • Monzo may now have their FCA banking license but are yet to successfully transition to be a fully fledged current account. This means it remains a pre-paid card, meaning you can’t unlock the full potential, and can’t yet get away from the punishing fees of existing current accounts.
  • The Monzo current account isn’t going to be for everyone. It’s unlikely they will provide significant rewards like other banks, like the rewards currently offered by Santander 123 Account and TSB Classic Plus Account. They are focused on millennials, who often run their current accounts close (or below) to zero and have been caught out by over-draft limits before.
  • There is currently a significant waiting list to get a card, last I looked – before I got my card – there were more than 66,000 waiting. You do get bumped up the list if you get others to join up, so hope your friends aren’t already on the waiting list!
  • Monzo is a relatively unknown quantity. As I’ve already mentioned Monzo hasn’t been around long and whilst there don’t seem to be any horror stories signing up and using the card – once it stops being pre-paid is a risk you need to acknowledge and understand.
• These are the main 5 negatives or drawbacks I see that could potentially put people off signing up with Monzo, or making the transition from using the pre-paid card to the full current account when available, however there may well be more that appear along the road. Having detailed these and taken them on-board I still think Monzo will continue to grow and could make a real impact with Millennials in the current account industry.

Conclusion 

• Monzo is a really cool and interesting app, and I was very excited to finally get my card from them recently, it’s a very vibrant colour!
• As I’ve highlighted in another post (http://jablifestyle.net/2016/07/14/introduction-to-fintech-psd2-blockchain/) the Financials Services industry is very set for disruption and for new comers to win over large numbers of customers, and I truly think Monzo will make an impact.
• Even when (if) Monzo becomes a fully-fledged bank I would suggest keeping an alternative current account just in case for a short while, but if you are a tech savy Millennial sick of the poor quality high street banks are offering then I absolutely suggest signing up and joining the revolution.