
Monzo, a U.K. challenger bank, raises £85M Series E - sj13
https://techcrunch.com/2018/10/30/monzocorn/
======
Sholmesy
Monzo is awesome; they deserve all their success. They have single handedly
forced banks to compete on UX, though Monzo still wins by a significant
margin.

Huge stat from the article;

> And in terms of customer growth, extrapolating stats from a recent
> Nationwide annual report (PDF link), the challenger bank says it now
> accounts for 15 percent of all new bank accounts opened each month in the
> U.K

Is this accurate? 15% of bank accounts opened in the UK each month are for
Monzo? That's an insane stat.

No affiliation, just a happy Monzo Beta user.

~~~
roymurdock
I don't understand debit culture in the UK

I'm an American who has a Monzo card and has spent a fair amount of time in
London. Why don't people use credit cards???? The rewards are usually pretty
good and as long as you pay off your balance every month, you're getting ~3%
of your purchases back in rewards/credit

I stopped using Monzo because there are no rewards! Sure it gives me
notifications and is easier to see my balance/add money than my Barclays
account, but what is the point of the good UX/UI? Is it for fraud detection
and making sure the merchants/bank aren't cheating you?

I ended up going back to using my oyster card/barclays card when contactless
was the only option, and credit for everything else. Transferwise was also a
godsend for converting money with clear visibility into the exchange rate/no
fees

I agree that Monzo has been a great catalyst for UK banks to get their shit
together on mobile apps etc. but there is nothing fundamentally different
about their business...they're a debit-only bank with no physical presence and
a nice app - and why don't more people use credit cards instead? Is it because
it makes P2P transfers easier than the archaic bank transfers?

~~~
baby
I'll try to provide an answer, as I'm European but moved to the US. We don't
have this "you're in debt" culture that I think you create when you start
school in the US. Very early you have to take a loan in order to study, which
facilitate the idea of owing banks.

I opened a secured card here in the US, but I never use it, because it just
feels weird to "owe" the bank money and not to be able to pay it back as fast
as I can. I usually have to wait for the end of the month, and if I mess
something up then I have to pay huge fines (that you cutely call APR).

The more you get into this system, the more you seem to collect credit cards.
I have friends with dozens of them. What happens if you lose one? Or if you
get your wallet stolen? Or if you forget that after the first year you start
paying fees on it? etc.

Most of us can live without the rewards if we get other benefits. For example
with Monzo, you get added security, you can use it all over the world for
free, you can send money to your friends or split the bill easily, you can
track your finance, set limits on your budgets, see what was that 30$ you
spent a month ago and where it was, round up your purchases to save money,
etc. There's just so much benefits that you end up using it all the time as
your default card. That's how they get you I guess. But it's so much more
practical and easy to use that people have fell in love with their branding as
well.

~~~
giobox
> We don't have this "you're in debt" culture that I think you create when you
> start school in the US.

I think an entire generation of students in England and Wales who now are
paying up to £9000 per year of study would likely disagree with this.

While this is still less than many US examples, it's still a ton of debt for
the average UK student who is unlucky enough to have an English or Welsh
postcode (Scotland continues to offer free higher education). Especially so
when you consider average graduate salaries in the UK.

~~~
jaziek
The big difference here is that student loan repayments are based entirely on
your future earnings. It is, for all intents and purposes, a graduate tax. The
majority of people will not pay off their loan before it is forgiven, and many
will never pay anything at all.

------
emdowling
Good on them. It's an outstanding product and they are iterating very quickly
on it. The app UX is starting to feel like it's bursting at the seams -
they've added in loans, and overdrafts, and savings pots, and international
transfers and no doubt more is to come.

I hope they take the time now to streamline their UX. A mobile-first bank is
an outstanding idea and Monzo have been the best to execute on it, but
avoiding bloat and maintaining speed and simplicity will be one of their
biggest product challenges.

~~~
nothrabannosir
_> ... maintaining speed ..._

Sorry I know this is not the point of your comment, but I couldn't let this
go: the Monzo app is by _far_ the slowest app on my phone. Until their more
recent updates it was nearly unusable on an iPhone SE. Still has >1sec
response times on almost any touch event. (comments on the forum suggest this
is because they use O(N) algorithms somewhere, and after 2y worth of events
the app slows to a crawl. doesn't inspire confidence, to be honest.)

To the point that I focus on putting as many spends as possible on another
card that has a better app, just so I can avoid spending any time in Monzo.

To end on a positive note: their support is so much better than the
competition it isn't even funny. Apparently they are the only bank with a
"brain required" policy for CS.

~~~
tempay
Apparently their Android app has better performance and they're working to fix
this on iOS:

[https://monzo.com/blog/2018/09/18/ios-app-
performance/](https://monzo.com/blog/2018/09/18/ios-app-performance/)

~~~
jonatron
I just loaded up the android app for the first time after booting. 5 seconds
before I could see balance, another 15 seconds before the graph loaded. It
used to be fast, but I hardly use it any more because it's slow to check my
balance.

~~~
vector_rotcev
I am on Android, and for me it used to be slow, but recently has become very
fast again. I just opened the app and it took <=1 second to get to see my
balance. I am on a very new phone though (oneplus6), and I don't know enough
about how different hardware affects speed.

That said, since I changed some settings to reduce battery/data usage, the
notifications for spending often don't turn up for several minutes, where they
used to be instant (before being able to put my card back into my wallet).

------
rocgf
I haven't used Monzo, but I have now fully switched to Starling, which seems
extremely similar - it's part of the new banking avant-garde in the UK and a
significant step forward compared to traditional banking.

After 5 years with a Natwest account, I would never go back. I find it
incredible that it still takes traditional banks 2-3 days to update my
statement with my latest transactions. I'd have scares regularly because I'd
have 300 pounds disappear from my account and I wouldn't know why for a few
days.

Another example is changing my address - it literally took less than a minute
with Starling, all from my mobile app. With Natwest I had to physically walk
to a branch, wait in a queue, talk to someone - in total, probably more than
an hour lost.

Yet another example - it takes about a week to open a business bank account
with Natwest. It took 5 minutes with Starling, all from home.

If anyone has any second thoughts about switching to something like Starling,
then just open an account. It's about as painless as you can imagine - you
download the app, apply for it with a 10 second video and then a card gets
mailed to your address. I can't believe I didn't do it sooner.

~~~
pjc50
Do any of the challenger banks do join accounts yet? Last time I looked Monzo
didn't. If they did I'd jump on it immediately.

~~~
matthewmacleod
Monzo recently launched joint accounts. I've set one up and got the cards, but
we haven't made the switch quite yet (apparently automated switching isn't
possible coming from existing joint accounts, so I need to spend an hour or so
updating existing payments).

~~~
tonyedgecombe
It's a bit odd the way they handle it, from what I can see you both need your
own account then you share a third joint account.

------
matthewmacleod
I was sceptical at first, but I've gone "full Monzo" recently, because the
experience of using this as a bank account is just _that much better_. Things
like an actual usable app, instant notifications, proper direct debit
management… the experience is an order of magnitude better than the mainstream
bank accounts I've had.

I get the impression that the current account offering is now stable-ish, so
we should expect to see other financial services being rolled out so that they
can start making some serious revenue. And if it doesn't work out, at least it
will have been part of the movement that is forcing older UK banks to improve
their offerings.

------
raesene9
I like Monzo, and indeed I'm a customer, but I do wonder how they're going to
generate sufficient returns to justify all the money raised.

Retail banking is fundamentally a pretty boring and low margin business, it
usually doesn't make the kind of money that VCs expect as returns, without
something like a sale to another company (something Monzo have said they don't
want)

~~~
wepple
Clydesdale bank has 38m gbp in assets, and they’re a relatively not-heard-of
obscure bank operating in the UK. I think monzo could bring want consumers
want globally.

I was preaching it’s virtues here in the US until they disabled international
customers; I really look forward to being allowed back on.

At risk of sounding cliche: the banking sector really needs some serious
disruption. It has for too long. There’s not a single conventional bank I’d
miss if it were replaced with Monzo.

So I think there is insane prospects. It’s thin margins, but without ever
bothering with stores and being tech focused, they can hopefully grow fast and
spread wide.

~~~
raesene9
Small correction, if you're going via the Wikipedia page Clydesdale has £38B
not M in assets :) Interestingly Clydesdale is one of the major old scottish
banks and one of three that have the rights to print their own bank notes.
Whilst they're not as popular these days as once they were, they're a pretty
major operation in Scotland and Glasgow's largest bank.

Global banking is extremely complex due to regulatory concerns. Whilst you may
be able to re-use an underlying technology platform, which would have
benefits, most of the hard work is in complying with regulations and fitting
in with the local market place

I wouldn't disagree at all that the banking industry is in need of disruption
(I worked in banks in the UK for ~10 years so have had some exposure to how
their system do or do not operate)

what I'm not so sure of is that the kind of returns that can be generated
without getting into other areas of banking (e.g. investment) will give the
kind of returns VCs expect.

~~~
jackweirdy
> ...and one of three that have the rights to print their own bank notes.

Wow, I've never heard of this before - who are the others?

~~~
pjc50
Ah, Scottish banknotes. Clydesdale and both of the banks of Scotland (RBS and
HBOS) can print their own banknotes, but they must be backed by sterling on
deposit at the Bank of England. A similar arrangement is in place for Northern
Bank of Northern Ireland, which produced one of my favourite UK banknotes:
[https://www.bbc.co.uk/news/uk-northern-
ireland-37342948](https://www.bbc.co.uk/news/uk-northern-ireland-37342948)
(Plastic! Portrait format! Space shuttle!)

One of the tiny frictions of British society is seeing whether people outwith
Scotland will accept Scottish banknotes.

~~~
SmellyGeekBoy
In my experience when an English shop tries to refuse a Scottish banknote a
Scottish person will always appear from nowhere to remedy the situation. ;)

------
becauseiam
This kind of growth is starting to make me be concerned as a customer - app
performance and latency have deteriated over time, and most importantly
customer service has also changed. Scaling good customer service for an
effectively free product whose revenue currently derives only from overdrafts
and very minimal fees from over-use is going to be very challenging for a bank
not yet profitable.

------
esotericn
Monzo are brilliant.

Prior to the existence of their mobile app, I used cash wherever possible
because it didn't require an extra budgeting step (10 quid in my wallet = 10
quid left for today, with a debit card I'd have to write things down or wait
ages for online banking to load whenever I did a thing).

Because their app actually updates in real time and doesn't require 50 levels
of nonsense 'authentication', I don't need to do that any more.

I do worry about privacy. I'd prefer to have an anonymous digital payment
method. We need to step up UX to get to this level of simplicity.

------
pm90
Why is it possible for so many small banks to start and flourish in the UK but
not in the US?

~~~
jackpeterfletch
This is actually related to a very deliberate initiative from the Bank of
England to make becoming a bank easier.

[https://www.bankofengland.co.uk/prudential-regulation/new-
ba...](https://www.bankofengland.co.uk/prudential-regulation/new-bank-start-
up-unit)

They recognized that it was basically impossible to enter the industry at one
point and its been stifling competition for a very long time.

------
benzoate
After they announced they were removing the ability to top up via debit card I
was concerned as much of their utility at the time came from being able to
share costs with friends from an isolated account with a lower balance. The
app has lower friction for most actions however, so I now use Monzo as a
distribution account to send funds to my other bank accounts.

I still don’t use the card itself at all however as they have no cash back,
and fwiw the app has started slowing down in recent months. The frame rate
consistently drops noticeably below 60fps when scrolling through my
transactions, for example.

~~~
lkiernan
Depending on what you mean by "share costs",
[https://monzo.me/](https://monzo.me/) is still a thing.

If it must be you topping up via card and you can't transfer traditionally,
Starling stil have the ability and I prefer it/them overall.

------
baby
I just moved from the UK to the US, and it looks like my options are pretty
bad in terms of bank:

* I am not allowed to use Monzo without a UK residence.

* To top up Revolut, I need to pay 3% of fee to Revolut and 3% of fee to Chase. On top of that it is not instantaneous.

I still continue to use my Monzo card here because it's just so practical (and
free), but at some point I'm really expecting something similar to disrupt
banks in the US.

If you see that orange card in San Francisco, that's probably me ;)

~~~
Blackstone4
Check out Charles Schwab. No fees on the bank account or foreign transaction
fees. Then it includes a low fee brokerage to invest your money with some of
the lowest fee ETFs around.

I've been a happy customer for 5 years.

PS you don't get the same UX or notifications etc. But they have good service.
Most people in the US use Venmo for P2P

~~~
baby
I actually have a debit card with Schwab but the app is nothing like Monzo
unfortunately :(

------
pankajdoharey
They have a very interesting idea, more such ideas should find place in
commercial banking and finance. I hope they succeed and probably be a
formidable competitor to Barklays and Citi of the world. Would definitely love
to use this once i move to UK.

------
jbb67
If they had a proper banking website and didn't expect you to use an "app" on
your phone I might be more interested.

~~~
ollyculverhouse
Err, that is what they offer, banking via an app. If that is a problem for
you, maybe you aren't their ideal customer.

~~~
jstanley
Why though? Why insist that their offering only works on the most insecure
class of device that people own?

~~~
raesene9
LOL, whilst I won't necessarily include all Android devices in this, I'd argue
that iPhones and better Android setups are likely the Most secure device that
most people own.

Traditional PC security is way too complex for non-technical people to manage
effectively, so the approach of walled gardens and vendor managed security is
the way to go.

Not to say that a technical person can't achieve a better level of security
with a PC/Mac, but for non-technical users, it's going to be mobile all the
way.

------
tim333
Darn it. I tried to buy in in their 2017 crowdfund at a £30m valuation but it
was oversubscribed. Still good luck to them.

------
lordnacho
Have any of you challenger bank people had Barclays?

I don't quite see what can be done better. There's an app, I can see my
personal and company accounts, payments can be done in a few seconds, direct
debits as well. There's also a website I can use to do the same stuff. I have
had quite a few online banking setups in various countries and I can tell you
there are much more cumbersome UIs.

What do I gain from changing to Monzo, Revolut, or the like?

~~~
cbzoiav
I don't use Monzo but the big benefits tend to be -

\- Low or no fee usage abroad \- Real time transaction notifications on your
phone. \- Transactions showing immediately on the account. \- Automatic
categorising of transactions. I.e you can see what you spent in restaurants,
shops, public transport etc. Monzo also let's you set budgets for individual
categories. \- Automatic saving. I.e. Chip monitors your account and takes
moves what it thinks you don't need to a savings account. \- Ability to freeze
the card in app (if say you lost it).

~~~
kypro
Anyone want to comment on the disadvantages?

Off the top of my head I know they don't have branches so you can't speak to
someone face-to-face like you might with a traditional bank. Is
online/telephone support generally good with these challenger banks? Are there
any other negatives I should be aware of if I sign up?

If I deposited a large sum of money into my account would I have all the
regular protections of a traditional bank or are there additional risks
associated with these small challenger banks?

~~~
dbbk
Monzo uses Intercom inside their app for customer support. I far prefer it,
because unlike with calling a typical bank it doesn’t demand your full
attention. You can just shoot them a message, go off and do something else,
and reply in your own time.

Even then, their response rates have been pretty fast.

In terms of financial protection you get the exact same FSCS protection as
anywhere else.

------
50
What’s special about Monzo compared to Simple?

~~~
dbbk
They operate in completely different countries so they don't compete.

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jakarta
If only their customer service could match Metro Bank

