5 ms·

How do they make money?

by substation13 4y ago

chrisseaton 4y ago
Interest on loaning your current account balance out.
deleted 4y ago
[deleted]
sksksk 4y ago
- Interchange fees (Monzo take ~1% of every card transaction) - Packaged account fees (Monzo Plus, Premium and business Pro) - Lending (Overdrafts, Personal Loans, Credit Card) - Interest on bank deposits
- blibble 4y ago
  they also charge you to take your own money out and put your own money in(!!!) Cash withdrawal in pounds in the UK: First £250 in a rolling 30-day period free, 3% after that Cash deposit: £1 per deposit to pay in cash at any PayPoint source: https://monzo.com/legal/fee-information/ https://monzo.com/legal/fee-information/
  - 55555 4y ago
    What the heck?
  - willyt 4y ago
    I was surprised by this and it turns out its a bit of a misrepresentation as you get unlimited fee free withdrawals if you meet one of these criteria which, in the UK, pretty much anyone except a teenager with no job will meet: At least £500 was paid into a Monzo account in your name over the last rolling 35-day period, and you have at least one active Direct Debit on the same account in the same period. You’ve received a Department of Work and Pensions or a Department for Communities’ payment into a Monzo account in your name over the last rolling 35-day period. You’ve received a student loan payment into a Monzo account in your name over the last rolling 8-month period. You’re sharing a Monzo Joint Account with someone who has done at least one of the above.
    - blibble 4y ago
      it's not misleading, it's true if you lose your job, you're now being charged 3% to pull your own money out (and regardless: they still charge you to deposit your own money, unheard of for retail customers)
      - ascorbic 4y ago
        The criteria seem to be mostly designed to ensure that people who aren't using it as their main account can't do things that cost Monzo lots of money. That said, if you want to deal mostly with cash then Monzo probably isn't for you, and I think they're ok with that.
danpalmer 4y ago
The short answer is that they don't really. UK retail banking is notoriously low margin, and all of the major banks struggle to make anything from their consumer businesses. Charging for bank accounts is not something the UK market accepts. They'll likely cover costs in the long term, and their business banking will probably do fine, but I suspect the valuations aren't justified. The main way that the major players make money is through things like mortgages, wealth management for the very wealthy, and through their investment banking arms. Starling is another startup bank, a main competitor to Monzo. While they're decidedly less "cool", they seem to have targeted business banking much more, and I suspect that's why they're now in a better position. Monzo went big on Monzo Plus and even on its ~3rd? iteration, it seems to have had a lacklustre reception. I'm Monzo user #13, about as onboard with the idea as I could be, and I find it unconvincing. Monzo have just launched Monzo Flex, an easy payment system like AfterPay/ClearPay/Klarna. I'd normally expect that to do well but it's about 2 years too late and going into a recession is probably not the right time. Hopefully it'll do well as we come out.
- Nextgrid 4y ago
  Starling makes money from business accounts (they pocket the interest on those, and that interest amounts to more considering business accounts keep a larger balance) and I believe also provides services to other payment companies, essentially SaaS-ing their tech. It's a shame because this is something that Monzo could've done just as well and there's absolutely a place (well, was - that's now taken by Starling) in the market for it. Natwest still charges extra for a "next-gen" business account that allows multi-user access to a web UI, and I bet it's terrible - this is something a company can Monzo could've built in days based on their existing modern tech at a time where there was nothing like it in the market.
  - danpalmer 4y ago
    Monzo do have good tech, but I've also heard that there is a "surprising amount of legacy tech" there as well. I'd interpret that as either they do too many re-writes of things, and/or they're perhaps not building at the level of quality that they should have been. They have some excellent engineers in the early team, but I've also seen a lot of very inexperienced people go there, so that in combination with a "move fast" mentality, will likely result in a lot of codebase issues and churn. Starling seem to have taken a "slow and steady wins the race" sort of approach, and had a bunch of experienced engineers build a boring old Java app. Nothing special but I'm not surprised that it is working out ok in the long run.

How do they make money?

chrisseaton 4y ago

Interest on loaning your current account balance out.

deleted 4y ago

[deleted]

sksksk 4y ago

- Interchange fees (Monzo take ~1% of every card transaction) - Packaged account fees (Monzo Plus, Premium and business Pro) - Lending (Overdrafts, Personal Loans, Credit Card) - Interest on bank deposits

blibble 4y ago
they also charge you to take your own money out and put your own money in(!!!) Cash withdrawal in pounds in the UK: First £250 in a rolling 30-day period free, 3% after that Cash deposit: £1 per deposit to pay in cash at any PayPoint source: https://monzo.com/legal/fee-information/ https://monzo.com/legal/fee-information/
- 55555 4y ago
  What the heck?
- willyt 4y ago
  I was surprised by this and it turns out its a bit of a misrepresentation as you get unlimited fee free withdrawals if you meet one of these criteria which, in the UK, pretty much anyone except a teenager with no job will meet: At least £500 was paid into a Monzo account in your name over the last rolling 35-day period, and you have at least one active Direct Debit on the same account in the same period. You’ve received a Department of Work and Pensions or a Department for Communities’ payment into a Monzo account in your name over the last rolling 35-day period. You’ve received a student loan payment into a Monzo account in your name over the last rolling 8-month period. You’re sharing a Monzo Joint Account with someone who has done at least one of the above.
  - blibble 4y ago
    it's not misleading, it's true if you lose your job, you're now being charged 3% to pull your own money out (and regardless: they still charge you to deposit your own money, unheard of for retail customers)
    - ascorbic 4y ago
      The criteria seem to be mostly designed to ensure that people who aren't using it as their main account can't do things that cost Monzo lots of money. That said, if you want to deal mostly with cash then Monzo probably isn't for you, and I think they're ok with that.

danpalmer 4y ago

The short answer is that they don't really. UK retail banking is notoriously low margin, and all of the major banks struggle to make anything from their consumer businesses. Charging for bank accounts is not something the UK market accepts. They'll likely cover costs in the long term, and their business banking will probably do fine, but I suspect the valuations aren't justified. The main way that the major players make money is through things like mortgages, wealth management for the very wealthy, and through their investment banking arms. Starling is another startup bank, a main competitor to Monzo. While they're decidedly less "cool", they seem to have targeted business banking much more, and I suspect that's why they're now in a better position. Monzo went big on Monzo Plus and even on its ~3rd? iteration, it seems to have had a lacklustre reception. I'm Monzo user #13, about as onboard with the idea as I could be, and I find it unconvincing. Monzo have just launched Monzo Flex, an easy payment system like AfterPay/ClearPay/Klarna. I'd normally expect that to do well but it's about 2 years too late and going into a recession is probably not the right time. Hopefully it'll do well as we come out.

Nextgrid 4y ago
Starling makes money from business accounts (they pocket the interest on those, and that interest amounts to more considering business accounts keep a larger balance) and I believe also provides services to other payment companies, essentially SaaS-ing their tech. It's a shame because this is something that Monzo could've done just as well and there's absolutely a place (well, was - that's now taken by Starling) in the market for it. Natwest still charges extra for a "next-gen" business account that allows multi-user access to a web UI, and I bet it's terrible - this is something a company can Monzo could've built in days based on their existing modern tech at a time where there was nothing like it in the market.
- danpalmer 4y ago
  Monzo do have good tech, but I've also heard that there is a "surprising amount of legacy tech" there as well. I'd interpret that as either they do too many re-writes of things, and/or they're perhaps not building at the level of quality that they should have been. They have some excellent engineers in the early team, but I've also seen a lot of very inexperienced people go there, so that in combination with a "move fast" mentality, will likely result in a lot of codebase issues and churn. Starling seem to have taken a "slow and steady wins the race" sort of approach, and had a bunch of experienced engineers build a boring old Java app. Nothing special but I'm not surprised that it is working out ok in the long run.