About a year ago, we suggested that the fintech disruptor Monzo is not actually a bank – if a bank is something that conveys to borrowers and lenders.
Instead, it appeared to be a popular checking account service that would ultimately help earn commissions by selling third-party financial products. At that time, only a fraction of the balance sheet was in overdraft, and customer deposits were parked with the Bank of England.
Now, however, there is a serious risk that a bank will fail.
Tom Blomfield, CEO, describes the company's loan offerings today in a blog post:
If you qualify, you can now borrow between £ 200 and £ 15,000 from Monzo for up to 60 months 💰
We offer interest rates of 3.7% of annual interest on loans from £ 7,500 to £ 15,000 and 20.4% of annual interest on loans up to £ 7,500 (however, we will tell you the exact interest rate you will pay before you apply).
The company's recent push into
Banking The maturity transformation seems to be clearly different from the company's earlier ambitions: to become a "marketplace" where other lenders could sell their products.
In a further blog post Mr. Blomfield dealt with the "culture" of the banking industry in 2016:
Typically, banks want to engage customers with loss-making introductory offers such as cashback for expenses, free travel insurance, or a cash lump sum for the change. Banks then feel they "own" customers and sell more profitable financial products, such as credit cards, mortgages and loans.
Loss introductory offers? Sounds almost as if the zero fees for foreign business at Monzo customers have arrived so well. Finally, the company withdrew the levying of ATM withdrawal fees after it had been subject to Community vote as this was unsustainable. Which is another word for loss.
Of course Monzo is a fast growing company and its strategy will inevitably change. It can also track elements of a marketplace model. The criticism of the traditional banks in 2016, where customers benefit from a subsidized service so that they can later sell profitable products, is similar to the development of Monzo, as they offer loans to their customers.
In today's post, Blomfield says Monzo's lending is aimed at tackling the "general lack of transparency, confusing terms and prices, and business models that seem to be designed to catch customers at banks." But none of these strategies differ from traditional banking in comparison to the market plan.
This approach, where mass customers of current accounts sell financial products from third parties (in order to avoid conflicts of interest), encounters problems that Jemima vividly presented in April. It is very, very difficult to earn a spread by offering financial products on the internet if the same products are normally available elsewhere on the internet, less the spread.
The 2016 blog post referred to third-party providers like Funding Circle who can offer loans at "incredibly attractive terms". However, the Funding Circle is fighting. It turns out that lending is extremely difficult. But that's what Monzo wants to do now. If it scales this business, it will be an interesting competition with traditional banks: the company would benefit from the lack of legacy costs, but it's a long time when online lending has not yet been proven (though one day it will not work prevents building up branches light orange lacquered).
The blog post concluded by stating that the bank of the future is a marketplace. But it seems that the bank of the future is actually … a bank.
Monzo: Metal Gear Solid – FT Alphaville
Monzo: When is a bank not a bank? – FT Alphaville
How Monzo focuses on customer apathy – FT Alphaville
The Chicago Digital Plan – FT Alphaville
What crowdfunding really is about – FT Alphaville