Fast-growing British digital bank Monzo plans to hire up to 500 people and forecasts it will get 5.5 million users this year, as it prepares to have another crack at charging some customers to turn a profit.
The loss-making firm has burned through cash to fuel growth and launch in the United States, but has had no problems raising capital and is valued at over 2 billion pounds ($2.6 billion).
Launched in 2015, Monzo has attracted 3.8 million customers in Britain with its bright coral card and spend-tracking data.
Some younger customers in particular have become fierce advocates, with the digital bank ranked as the most likely brand in Britain to be recommended to a friend in a YouGov survey in November.
Tom Blomfield, the 34-year-old founder and CEO, told Reuters he expected Monzo to top 2,000 staff this year, up from 1,500.
The bank has run into problems, however, including the abrupt cancellation of a premium paid-for account in September after only a few months. It has also been hit by a flurry of complaints, including from customers who said they had been locked out of their accounts for no reason.
Blomfield said Monzo planned to relaunch the paid-for accounts in the first quarter of this year, implementing lessons learned from complaints following its botched attempt in 2019.
“We learned that things that seem a universal truth when you are 50 people, launching iteratively as no one is paying attention, when you do that with 3.5 million customers it’s foolish,” Blomfield said.
Blomfield said Monzo’s plan was to float within three to four years and he expected the firm to be profitable by then.
The bank, which reported a loss of 47.2 million pounds in 2018, is in talks with investors to raise between 50 to 100 million pounds. Blomfield declined to comment on the talks.
“Our real focus is on monetization,” he said. “We’re looking to drive revenue and do it in a way that’s transparent and fair.”
Monzo wants to do that by lending more and rolling out paid-for services like the premium account.
It currently lends out 120 million pounds, compared with deposits of 2 billion pounds.
Blomfield said the bank would learn from rivals that had failed to replicate success at home in new markets, including Germany’s N26, which quit Britain last week.
“In the U.S. we are laying the groundwork, but not looking for explosive growth,” he said.
“The lesson there is if you take a product and just move it across unchanged it doesn’t do well – N26 didn’t connect”.
N26 blamed complications of obtaining a license after Brexit for leaving Britain.
Monzo has no interest in selling up to an incumbent bank, Blomfield said.
“We’ve been rude enough about them in the past that they’ve stopped trying.”
Reporting by Iain Withers and Lawrence White; Editing by Mark Potter.
Ian Bradbury, CTO for Financial Services, Fujitsu UK:
“As customers continue to hunt for the best digital experiences and new and improved services, the banking sector is being quickly revolutionised. New entrants, such as Monzo, Starling and Revolut are diversifying their offerings, and increasingly moving towards paid-for accounts. But for fintechs it isn’t all plain sailing. Following last year’s issues when Monzo had to reverse a product rollout after complaints, it will be interesting to watch customers’ reactions now when the fintech relaunches its paid-for accounts.
“For Monzo, the issue is that although it has the growth and a healthy customer base, the company is not generating profit yet. Unlike traditional banks, most of its deposits sit in the Bank of England, which provides fantastic security, but generates little return. As a result, Monzo needs to look for other ways to generate a profit – for example paid-for accounts. But the company has got something right – it is acquiring customers quickly, and recently was recognised as Britain’s most recommended brand by a YouGov survey.
“Monzo’s challenge is to now monetise this brand value by getting its customers to voluntarily pay for its services - rather than take the traditional bank route of making good returns from investing its deposits. This will be a challenge in a world where many banking services are still ‘free’. This is particularly important as challengers are still navigating the question of customer trust - UK consumers are the least trusting of challenger banks, with 40% saying they don’t trust them at all and only 12% admitting they completely trust their challenger banks.”