Go for Monzo: Monzo looks to relaunch paid-for accounts
March 21, 2020
2 min read
What's going on here?
Monzo is looking to relaunch paid-for accounts in the first quarter of 2020, after a failed attempt in 2019, following complaints.
What does this mean?
Monzo will hire 500 more staff to avoid a repeat of their poorly implemented attempt last year. It forecasts an increase of 2.8m customers this year, pushing its customer base past the 5m mark. The number of staff will climb from 1500 to 2000. The bank’s aborted 2019 attempt at a Monzo Plus account included home and travel insurance, airport lounge access and an increased ATM allowance for a fee of up to £13 per month. This was withdrawn within 5 months of its roll-out owing to poor customer feedback.
What's the big picture effect?
Founder and CEO of Monzo Bank, Tom Blomfield, disclosed to Reuters that the bank initially did not succeed with its paid-for accounts as its approach to new products had not changed. He admitted that it would be “foolish” to continue with the same approach given the dramatic increase in its customer base. Monzo’s increased focus on driving profits makes perfect business sense as they plan to float in 3 or 4 years when they expect to be profitable.
The bank’s expansion and new product roll-out comes at the same time as its German competitor N26’s exit from the UK market citing Brexit as the reason. As a European bank, N26 holds a European banking license and this would not be transferable to the UK market once the Brexit transition agreement comes to an end in December 2020, thereby also signalling the end for financial passporting rights. Passporting allows a firm registered in the European Economic Area (EEA) to do business in any other EEA state without the need for further authorization from each country.
This also comes at a time when customer confidence in the newer “challenger” banks (smaller, newer retail banks who often use technology) is dwindling. Alongside N26, Fidor, another German bank, withdrew from the UK last year. However, this seems to only have benefitted Monzo, given that it was named as the brand UK users are most likely to recommend- in a YouGov Brand Index survey in November 2019.
While Monzo aims to raise more than £100m to fund its expansion plans, another British challenger bank, Starling, has already raised £60m to that effect. JP Morgan is also looking to launch a challenger bank in the UK. The fintech scene in the UK is moving at a fast pace and it remains to be seen how traditional banks will react to the expansion of this new and dynamic sector of finance.
Report written by Maya Sajeev
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