Why Monzo stands out in fast-paced finance

FinTechs are starting to pose a serious threat to traditional retail banks.
12 December 2018

Monzo CEO & co-founder, Tom Blomfield. Source: Monzo

UK challenger bank Monzo has just completed a landmark £20 million crowdfunding round involving 36,006 people.

2,457 investors from previous rounds invested again and the company welcomed onboard more than 33,549 newcomers, it said in a blog post.

This is the largest ever crowdfunding round by a UK FinTech company. And it caps off a great 2018 for the venture, a year in which it also surpassed one million customers and nabbed Unicorn status after its value eclipsed $1 billion.

Community spirit

Traditional UK High Street banks have long been plagued with accusations of taking customers for granted. Initiatives like the Current Account Switch Service have been moderately successful. Over four million current accounts have been switched so far and more than 40 banks and building societies are now onboard.

But for real change to happen, the challengers needed to set themselves apart. Monzo has done this by building a strong customer community.

“We’re happy that so many of you have been able to get involved and take a stake in the bank that you’re helping us build. Our community has played an essential part in making Monzo what it is today, and your support and feedback are becoming even more crucial as we grow,” it said in the aforementioned blog post.

Quiet revolution

New entrants also needed something of substance from the regulators. And this year they got it in the form of PSD2. European legislation requires banks to share their customer data with third-party providers to enable them to create new financial products.

It would appear that a quiet revolution is now happening. A survey of 2,000 UK consumers commissioned by Crealogix found that one in four under 37s are using digital-only challengers and 14% of UK bank customers across all age groups have at least one mobile-only digital banking provider. Up to a third of under 37s have two or more accounts with challenger banks.

In Europe alone, there are 1,400 new neo-banks, payment providers and FinTechs that have sprung up since 2005, according to research by Accenture. These include London-based Curve, which lets users combine their various debit and credit cards into a card and a smart app and has landed more than 300,000 customers since February this year. And Germany’s N26, which has hit two million customers and 24 countries, including a recent launch in the UK.

Many industry observers have questioned whether newbies can move beyond the FinTech hype and eat into the highly-centralized market share of RBS, Lloyds Banking Group, Barclays et al. The latter still loom large and they are also fighting back with their own digital offerings, startup acquisitions and collaborations.

At the same time, however, the impressive growth of Revolut and Monzo in the pre-paid space has shown the willingness of Brits to embrace new customer-focused services.

The figures and rate of change are enough now to make incumbents sit up and take notice. Those who ignore this quiet revolution will suffer the same fate as Kodak and Blockbuster.