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Monzo

What’s Monzo been doing?

What’s new from challenger bank Monzo? This article will keep you up to date on all the innovations, new functionality, partnerships and user experience enhancements from the brand formerly known as Mondo. 

Latest Monzo news (March 2018): Reaches half a million current account users less than a month before shutting down its pre-paid service. Scroll down for more information.

Launched in June 2015, Monzo is a ‘mobile-first’ digital bank with a fervent and dedicated user base due to its customer-centric approach and user-friendly design. The challenger has positioned itself as an alternative to traditional banks, allowing greater control and visibility of your finances. It stands apart from its competitors by offering intelligent notifications, instant balance updates and financial management.

Monzo competes on the grounds of usability and design, with a slick interface and a good approach to interoperability. Its approach to innovation, gathering feedback from customers and encouraging them to ‘break things’ to improve their product, is also particularly noteworthy. The digital bank boasts an excellent customer support network, regular blogs and an active online community that has helped to establish the bank as a trendy FinTech whose user base has grown rapidly, largely from referral marketing and word-of-mouth recommendations.

Monzo’s growth and popularity among its users is impressive and as it rolls out its current accounts, the future looks bright for the digital bank. We have outlined Monzo’s major developments and announcements in a timeline below.

August 2016

New name

Following a legal challenge to the business in June 2016, Monzo (at the time known as Mondo), emailed its customers asking for suggestions for a new brand name. It announced on its website that it received more than 10,000 suggestions for the new moniker.

Quick to reject the idea of calling themselves ‘Banky McBankface’, the bank formerly known as Mondo asked the public to come up with a new name in June 2016. They stipulated that it should begin with an ‘M’ and work across different languages and cultures.

Although already popular, the rebranding marked a significant point in Monzo’s development. Speaking at the time of the rebrand, Jess Morley, Research Manager at Mapa Research, commented: ‘This is an exciting development in the UK retail banking market. Monzo in its current guise has already made a dramatic impact on customer expectations. Monzo has brought PFM functionality to the mass consumer market, with its easy to spend categorisation, augmented transaction data, transaction search and trackable spending graph.

‘All these features are perfectly integrated with the iPhone hardware and intuitive to use, giving customers far greater visibility of their spending. The consequential increase in demand for such features has been notable; with a number of incumbent banks rushing to include spend oversight features into their apps within the last couple of months. If Monzo can do this just as a pre-paid card, its potential impact on the current account market is huge.’

mondo-monzo-email-announcement

Receives restricted banking licence

Also in August, Monzo received its banking licence from the Financial Conduct Authority and Prudential Regulation Authority.

UK regulators granted the bank a restricted licence, 18 months after it first launched. The app-only bank spent the next few months in a phase of ‘mobilisation’, promising a full bank launch- including direct debits, faster payments and ‘everything else you’d expect’ as early as July 2017.

Working with regulators, Monzo’s aim was to turn their pre-paid card scheme into a full current account. With 30,000 users and a further 200,000 in a queue for the coveted coral card, it was clear that demand was high for a current account. Finally getting the restrictions lifted in April 2017 meant that the bank could work towards the goal they set out to achieve in June 2015 of creating an alternative to traditional current accounts.

October 2016

Golden Tickets

In October 2016, Monzo introduced its referral marketing scheme ‘Golden Tickets’. Users were given Golden Tickets which they could then send to friends and family who were then able to skip the queue for a Monzo account.

Monzo-referral-marketing

November 2016

Introduces new features

By the end of 2016 Monzo’s customer base had grown to over 70,000 and the bank was rapidly developing and updating the app. In November, Monzo made it easier for users to see which friends were already on Monzo and easily send money and receive money from them by introducing a new ‘Contacts’ tab. They also allowed temporary magstripe usage, which could be turned on for 24 hours in the app, so that customers using their Monzo cards abroad would not run into trouble when magstripe was the only payment method available.

December

Monzo.me

December 2016 saw the launch of Monzo.me. This marked the first iteration of a bill-splitting functionality in the app. With Monzo.me, users would generate their own personal Monzo.me link in the Request tab of the Contacts section, which would let users send contacts a link that would allow them to pay using a debit card even if they were not Monzo customers.

This update allowed Monzo users to split bills and request money simply and effectively, helping to develop the banks reputation as a user friendly challenger, offering financial management tools otherwise unavailable through traditional banks.

March 2017

Raises £12m in crowdfunding round

March saw over 41,000 people pledge £12m in a crowdfunding round that massively exceeded the banks £2.5m target. Investors were then picked in a random ballot and had 48 hours to complete their investments. This investment round brought total investments to $45m with the bank promising to use the funding to develop their upcoming current account.

This huge interest, that vastly outstripped the challenger bank’s ambitions, is indicative of the enthusiasm of its user base, an extremely valuable resource in a competitive market.

Service disruption

In March, Monzo experienced a major disruption in its service, with users unable to complete card payments, top-ups or money transfers. The technical issues are believed to have originated with Global Processing Services, a third-party payment processing company based in Dubai.

Many smaller challengers use third parties to process card payments, as the process involved in connecting directly with card schemes, such as MasterCard or Visa, is complex and expensive. A list of other providers affected by the technical breakdown reads like a who’s who of British FinTech challengers including Revolut, Curve, Starling Bank and Pockit.

Despite the scale of the outage and obvious impact on users, Monzo’s customer-centric reputation remained largely intact thanks to the way cardholders were kept up-to-date and informed throughout.

Monzo’s service failed at 9:47 on Sunday morning, by 10:17, the FinTech provider had sent an update to every user’s app to notify them of the problem. Hourly updates then followed, keeping customers informed about on-going efforts to resolve the issue. At 16:45, Monzo posted a summary of the situation on its blog, giving customers a detailed explanation for the outage and informing them of the decision to bring card processing operations in-house rather than relying on a third-party processor- the result of a 12-month project to connect its systems directly to MasterCard.

Monzo, which does not charge fees for overseas currency spend, then promised to reimburse customers who incurred fees because they were unable to use their Monzo card during the outage, asking them to get in touch once the issue had been resolved.

Customer reaction to the outage was certainly tempered by the level of interaction on Monzo’s part, generally recognising that technical issues are inevitable and praising the way in which customers were kept in the loop from beginning to end.

While the issue itself was unfortunate, the way in which Monzo handled the fallout provides a masterclass in customer service.

Monzo-Outage-Notifications

April 2017

Banking licence restrictions lifted

In April 2017, Monzo had its banking licence restrictions lifted, becoming a fully authorised, unrestricted bank and allowing the FinTech to provide current accounts to its customers. It announced that it would be taking the process slow in order to offer the best possible experience for its customers. The bank began by running current accounts with a small group of people with plans to eventually roll the accounts out to all customers.

After launching in 2015 with the promise to build ‘a current account that lives on your smartphone and gives you control of your money’, this announcement had been a long time coming. Monzo’s current accounts are highly anticipated and will bring the challenger in line with rivals such as Revolt and Starling Bank who already have functional current accounts.

May 2017

Puts API development on ice

May 2017 saw Monzo put its API developer plans on the back burner as it faced the challenge of launching current accounts for its 190,000 customers. The news was a blow for the 2000 people on the bank’s developer Slack channel who had invested time in building integration to the Monzo API.

Monzo has consistently placed its user base at the forefront of its development, encouraging an active conversation between the users and the bank. One of the ways the digital bank has engaged with its users is by hosting several hackathons since its inception. The aims of these hackathons were to harness the power of open banking APIs and build projects that could be integrated into the app. These groups grew into a 2000 strong developer community on Slack. However, following the announcement that Monzo’s banking restrictions were to be lifted, the bank announced that it would be channelling its resources into providing current accounts and therefore would not be able to spend much time on its public API work.

The challenger has not, however, completely scrapped its public API. It is planning on launching a public bank API and developer tools at some point in 2018, once it has fully rolled out current accounts.

Available on Android Pay

Monzo announced that it was now available on Android Pay in May. When you visit Monzo.me on a phone or tablet that has Android Pay, you were now able to pay friends or family. Support has also been built in for Chrome’s new Payment Request API so that if a customer does not have Android Pay, money can still be sent through Monzo.me using card details stored in Chrome or that are later added.

July 2017

Begins phased rollout of current account

Monzo announced in July that following internal testing it would be rolling out current accounts to the public.  It is aiming to initially roll out between 10,000 and 20,000 current accounts to existing customers, chosen randomly, and aims to offer a current account to all existing Monzo customers by the end of 2017. Launching initially only on iOS, Monzo’s Android app plans are an estimated couple of months behind.

To be eligible for this current account, applicants will need to have been a Monzo customer for at least six months, with the majority of transactions made in GBP in the UK, and be a UK resident.

The Monzo current account will have many of the features that a regular current account offers, including FSCS protection, and payments that should only take a few seconds.

However, there are some missing features that customers may expect from a current account (and, in particular, a current account from an innovator like Monzo) including mobile P2P payments to other Monzo users. In-app customer support is available, but initially only from 9am to 6pm while there are more people available to solve problems. Monzo hopes to roll out 24/7 support later in the year once initial teething problems are ironed out.

Early customers will have to download a separate Monzo app to access their current account, and continue to operate their prepaid card via their existing app; ultimately the two products will be combined into a single app.

Monzo seems wholly aware that a perfect current account service will not take place overnight, as it states in its announcement: ‘This is not the finished product and so only register if you’re happy to use it with the limitations outlined above.’

Monzo’s current account is highly anticipated among its fervent user base and is long overdue. Rival banks Starling and Revolut have already established their current accounts, with Revolut launching new Euro current accounts in July 2017. Although Monzo has quite a bit of catching up to do, the bank is pacing itself in order to ensure that it is delivering a high quality product to its 250,000 customers, a move that will likely benefit it in the long run if it is able to launch a successful and competitive current account product.

Machine learning powered ‘Help’

July saw Monzo update its Help screen, introducing a new search bar, powered by artificial intelligence.  The team at Monzo has trained the Help algorithm to learn linguistic nuances by feeding the algorithm conversations they’ve received through the in-app chat. It now has an understanding of natural language and is able to use ‘common sense’ in order to answer customers’ queries. For example, if the customer asks about getting their partner a card, the model will assume the user is asking about joint accounts, whereas if the customer asks about getting their friend a card, the joint account option is not shown. This new feature also pre-populates the in-app chat with the user’s question if the algorithm is unable to answer it, ensuring that customers are still able to chat to live agents in its popular chat function when necessary.

September 2017

Begins energy partnership trials

Monzo began trialling energy partnerships in September, enabling users to see if they could be paying less for energy and allowing them to switch providers in-app. Monzo has always been vocal about its plans to become a marketplace bank. It therefore comes as no surprise that the challenger is beginning to form partnerships in order to evolve its customer experience.

The new feature will recommend alternative energy providers, and permit its users to switch their contracts to a new provider. These suppliers could either be recommended by Monzo’s partners at price comparison service, Energy Helpline, or a supplier that Monzo is working with directly, Octopus Energy or Bulb. Phil Hewinson, Head of Partnerships, said that the bank of the future should be one that ‘helps users manage everything related to their money, and makes sure they get the best deal.’

This is a first step towards a fully-fledged marketplace within the Monzo app.  Monzo aims to develop partnerships that will provide a rich and varied choice of financial and lifestyle apps that will be available through APIs from within the Monzo app. Developing a wide range of quality partnerships is important as every FinTech will be looking to do the same, with incumbents probably following suit as they move toward providing users with a more tailored experience. Indeed, this announcement comes two weeks after rival Starling Bank launched its own marketplace. With its cult following and popular appeal finding businesses to partner with seems likely, for example Deliveroo added a ‘Split the bill with Monzo’ link on its app allowing customers to share their Monzo.me link straight from the app.

As Monzo is still rolling out its stripped back current accounts it risks falling behind rivals Starling Bank and Revolut. The digital bank will need to develop strong ties with trusted and innovative companies if it is going to prove its utility over its rivals, the energy partnerships trial is the first step in this direction for the challenger.

October 2017

Introduces foreign ATM withdrawal fees

Monzo has announced that it is introducing a fee for international ATM withdrawals. Monzo customers will now have £200 fee-free withdrawals per month and then pay 3% thereafter. The new fees will be introduced from 18th December 2017.

After announcing that it was going to have to introduce foreign ATM fees, Monzo asked its community to vote on a pricing option, with over two-thirds of users voting for the above rate.

Monzo was clear to reiterate that spending by card in a shop, hotel, restaurant or any other ‘point of sale’ abroad would remain free of charge, as would online transactions in a foreign currency. ATM withdrawals in the UK would continue to be free.

Up until this point, Monzo has been absorbing foreign withdrawal fees which can be between 1% in Europe to 2% outside of Europe. Due to Monzo’s expanding popularity these costs have risen dramatically, with foreign ATM withdrawal costs rising from £6 per customer in June 2016 to £16 per customer in August 2017. This accounts for over half of the total cost per Monzo current account customer. In addition, Monzo stated that only 13% of Monzo’s customer accounted for over 85% of the total ATM costs. For these reasons, Monzo has said international ATM fees are necessarily to build a successful and sustainable business.

Although this will come as a blow to many Monzo users, it was always likely that Monzo would eventually introduce foreign ATM fees due to the high costs involved. Starling Bank however, still offers fee-free foreign ATM withdrawals and Revolut offers a cheaper rate of £200 a month fee-free and 2% thereafter. Monzo has stated that it doesn’t necessarily want to be the cheapest on the market, but wants to ensure that it can be a sustainable business while also not profiting from ATM withdrawals. Indeed, there is a question as to how long Starling will be able to offer fee-free foreign ATM withdrawals before it too must start charging.

The last few months have been relatively quiet from Monzo as it rolls out its current accounts to all its customers, with no new features introduced. However, by engaging with its customer community, listening to their thoughts and asking them to vote on the best way to recoup the costs, Monzo has once again proved itself to be a mastermind in customer engagement.

Android Pay for Current Account holders

Android Pay is now available to Monzo current account holders. The payment feature, which normally has a limit of £30, is said to allow larger transactions if the phone is unlocked at the point of payment. Launched exclusively for its debit card holders, the challenger will start inviting existing customers to upgrade their pre-paid cards in the coming weeks.

November 2017

Monzo Pots

November saw Monzo release its savings feature, ‘Pots.’ Users will now be able to set money aside within a number of ‘pots,’ that can be tailored to individual goals and savings targets. Users simply give the pot a name such as ‘concert tickets’ or ‘holiday,’ set an image for the pot and then they are immediately able to store money in their Monzo account.

Several challenger banks have introduced similar features over the last year, US-based digital bank Moven introduced its ‘Stash’ feature back in March 2017 and at the beginning of October, Starling Bank introduced its ‘Goals’ feature. The savings functionalities offered across these banks are very similar, they all provide a space for users to set their money aside without opening a separate savings account. Due to the low-interest environment, consumers are increasingly looking at savings accounts as places to store their money away from their main current account rather than as places to accrue interest. It makes sense, therefore, that digital banks are looking at ways of making this experience simpler by integrating it into the main accounts, allowing users to save towards particular targets and access the funds at any time.

Monzo has also indicated its plans for the rest of the year, including rolling out current accounts to all its customers by the end of November, introducing overdrafts and sending out investor cards. As Monzo finally upgrades all its customers to the current account, a project that has clearly kept the digital bank busy over the past few months, we can expect additional features and functionalities announced in the new year.

January 2018

Interim API

Open Banking arrived in January 2018, meaning the UK’s top nine banks are now required to share their data with third party Account Information Service Providers (AISPs). Considering this, Monzo made an interim API available for third parties to use in order to integrate basic Monzo services into their apps. This means that aggregator platforms will now be able to access Monzo accounts, balances and transactions, with more functionalities being added once Monzo releases its full API.

 

Emma, a new money management app, became the first provider to link to this interim API despite only having received their FCA licence in January this year. The app is designed to help users to avoid going into their overdrafts, manage subscriptions, pay off debts and save money by aggregating their financial information.

While Emma is the first start-up to take advantage of the interim API becoming available, Monzo has stated that other aggregation platforms including Yolt, Plum and Chip are already in line to integrate the data. Monzo will be launching an Open Banking hub with a full range of APIs later this year, allowing AISPs to integrate a wider range of Monzo’s data and functionalities into their apps.

February 2018

Monzo integrates with Moneybox

Monzo and Moneybox integrated in February. The new partnership enables users to round up and invest the change from their everyday purchases on their Monzo card. Moneybox’s co-founder, Ben Stanway stated: ‘offering round ups to Monzo users has been one of our most popular feature requests since we launched Moneybox.’

Moneybox’s app update now has a Round up with Monzo option on its Discover section, which then gives customers the option to connect their Monzo account to their Moneybox app. To authorise the integration with the Monzo account, customers submit their email address and click on a ‘magic link’ sent in an email.

This year, we expect to see many more partnerships between challengers and FinTechs, using the new PSD2 legislation to broaden existing service propositions.

Expands to Ireland

After gaining passporting permission from the Bank of England’s PRA, Monzo has announced that it will be kickstarting its international expansion plans by moving into Ireland. Monzo has also revealed that, as part of its international expansion plans, it is currently in early talks with US regulators.

March

Reaches half a million current account customers

March saw Monzo reach the milestone of 500,000 current account customers. After launching current accounts in October 2017, Monzo has been gradually rolling them out to all its customers. The current account now includes all the features available in the pre-paid card including instant notifications, budgeting and innovative payment features after being launched with limited functionality. Monzo will close its pre-paid Beta on April 4th, meaning that customers that have not upgraded before this point will no longer be able to use the app. Retaining customers through the upgrading process is an important step for the digital bank to keep it competitive and this is a good sign that it is keeping its users loyal.

Monzo released this video visualising customer growth since launch:

Coin Jar

Monzo began trialling its new ‘Coin Jar’ feature in March. Users are now able to name one of their savings pots ‘Coin Jar.’ Once this is done, Monzo will automatically round up every purchase over £1 to the nearest pound and deposit the change into the coin jar. This feature is similar to Moneybox’s round-ups and allows users to ring-fence funds within their main current account. Customers are becoming less concerned with having traditional savings accounts and are moving towards new, novel ways to save, for example by setting aside money for goals within their current account.

Future

2018

Monzo has outlined its plans for 2018 in a blog, including bank statements, improved bill management, overdrafts improved PFM and improved pots. The bank has also said that it will be shutting down its prepaid cards at the beginning of April this year prompting all users to convert to the current account version of the app. This will be a big year for digital banks like Monzo. Following the implementation of PSD2 incumbents, challengers and aggregators are all vying to be the first platform to become the go-to ‘marketplace’ app.

Monzo University

Monzo announced its education platform Monzo University in July 2017. It is an online platform where the Monzo team and external experts share their knowledge to help users learn about their finances. Still in its early stages, the challenger is using its user base to offer suggestions for topics and improvements. Monzo consistently places its users at the core of its products, and by providing help and education, the company is further entrenching its reputation as a positive, customer-focused alternative to traditional banks.

Mental health support

Monzo has also stated its intention to take mental health into consideration in its design. Building on its reputation as a customer-first bank, the challenger is planning to introduce features which will make the app more accessible and will help users with various mental health conditions. For example, one method would be introducing ‘Positive Friction’ to the app, providing safety barriers that would allow users to review purchases made at night the next day. This would be beneficial to users with bipolar disorder who may make compulsive and irresponsible purchases in a manic phase. Another feature might be to allow a designated carer who would help verify and approve purchases above a certain amount.

In addition, Monzo’s intelligent financial management tools will be able to predict when users are headed towards financial struggle, for example when there is a loss or reduction in income, and suggest proactive solutions to avoid and mitigate the situation. A further way to support customers, the challenger has suggested introducing a feature which would allow users to choose how they wish to be contacted, through chat, email or phone. This would help users with anxiety disorders to get the information they need and feel comfortable doing so.

Monzo has stated that it wants to set a standard for how products can work for vulnerable people, a pretty ground-breaking position in the financial services. As current accounts are rolled out we are sure to see more features released that set the bank apart by making it more accessible.

Summary

Monzo has over 500,000 current account customers and counting. Although it faces tough competition from the likes of Revolut and Starling Bank, its growth over the past year has been commendable. The challenger bank’s ability to engage with its users and keep them active is integral to its success over the coming months. Following the arrival of Open Banking, digital banking has become more competitive than ever. Incumbents will begin introducing many of the functionalities offered by Monzo and competitor digital banks will launch and evolve. The next few months will be integral for Monzo’s success and longevity.

With its user-friendly financial management tools such as its ‘Pulse’ bar and categorisation tools, its excellent customer support, and its fee-free exchange rates when used abroad, it is easy to see why Monzo has such a dedicated customer base. However, there are many players in the challenger bank market and with rivals such as Revolut (who recently reached 1.5 million users and became the first challenger bank to break even) performing strongly, Monzo still needs to prove that it stands apart from its competitors and that its users’ dedication is warranted.

Want to see what’s happening across the new UK banks? Our Challenger Banks report stays up to date with all the news from this growing sector. For a closer look at how banks like Revolut acquire, engage and delight customers online, check out our competitor analysis products, or contact us today. 

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