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For a short time in the late 2010s, Monzo managed what seemed impossible at first glance. It made the bank look cool. For a particular subset of young British people in high tech criterate, withdrawing Monzo debit cards that pull out “hot corals” has become a status gesture.
Monzo says ten years after its launch, customers say they “love, not like it.” But it still doesn’t solve one of the biggest challenges many fintechs face. They are persuading those lovers to say goodbye to other banks.
Bank customers are well known for their high stickiness, making it difficult for newcomers to enter the developed market. As long as you receive the basics without any problems, there is a limit to the number of people who will devote their large thoughts to their bank accounts.
This helps explain why only 56% of Monzo account owners actually use their cards every week. While many people can be sure they try out new apps, they are not troubled by the hassle of moving their entire financial life. The weekly percentage of users has declined rather than increased over the past five years.
The closest fintech to overcome the problem focuses on customers who cannot afford to become indifferent. For example, Brazil’s Nubank targeted people who struggled to access traditional financial services. In the first quarter, over 80% of our customers (almost 100 million people) used it at least once a month.
Chime – The US rival, due to be released Thursday, what Monzo has to compete for when expanding in the Atlantic is targeting earnings under $100,000. Two-thirds of active customers say they use it as a “major financial relationship.” It is difficult to achieve in a market like the UK where large banks have the legal requirement of providing free services to poorer customers.
Monzo has made some progress. Currently, about a third of our customers use it as their main bank account, up from 23% the previous year. Pre-tax profit almost quadrupled in last fiscal year to £60 million. The problem is that the revenue per customer is low, and the cost eats up 73% of the revenue. This is higher compared to the UK’s large traditional banks, despite their efficiency, primarily from being digital.
In that sense, Monzo is very similar to millennial customers. Their finances are far less precarious than before, but they still have a long way to go to catch up with their boomer predecessors.
nicholas.megaw@ft.com
