Challenger banks in the UK took flight in the mid-2010s, accelerated by legislation from the EU and UK government which welcomed new competition in the industry.
In a two year period, Revolut, Starling and Monzo (Mondo at the time) were launched, with an aim to win customers through better mobile experiences. At the time, mobile banking in the UK was a nightmare, some banks were still struggling with the web.
Starling Bank was the first on the scene in the UK, launched in 2014. Tom Blomfield, the founder of Monzo, was chief technology officer at Starling, but left the position in February 2015 after “tensions” between him and Starling CEO Anne Boden.
Blomfield took a few members with him in the exit to form Monzo, which launched its alpha prepaid debit card in November 2015, 10 months after leaving Starling. By August 2016, over 200,000 people were on a waitlist for the prepaid card, it had broken the record for fastest successful crowdfunding campaign, and the FCA approved Monzo’s application to become a limited bank.
Before Monzo, excitement and banking had rarely been uttered in the same sentence. First Direct, Egg and Metro had all drawn interest when first launched, but fizzled as customers began to realise the drawbacks and retreated back to the big four.
And shockingly, Monzo created this buzz without offering a competitive interest rate or cash incentives. The original Monzo app was bare bones in terms of features, but peer-to-peer payments (with emojis) and real-time balance updates resonated well with millennials, who weren’t as interested in mortgages and savings.
Monzo also did away with complex log-in processes and defective mobile interfaces, which are still common on traditional banking apps.
The banking app earns most of its revenue from a process called interfacing, in which it takes 0.2 percent for every debit card transaction. It launched a premium service in April 2019, but discontinued it five months later due to small uptake. It recently relaunched Plus with new benefits, for £5 a month.
Monzo has also partnered with OakNorth, Paragon and Charter Savings Bank to facilitate savings through the app.
Even with no physical branches, Monzo has still lost money every year since launch. As many still use Monzo as their secondary bank (only 30 percent deposit more than £1,000 a month) it reduces the amount of transactions on the platform, which is why the company sees growth as the key metric to profitability.
In 2019, Monzo became one of only 16 “unicorn startups” in the UK, valued at over £1 billion. It was a pivotal year for the company: it launched in the United States with Sutton Bank, finally reached a net positive for average customer contribution and tripled revenue.
The coronavirus pandemic has put a spanner in Monzo’s success. It was forced to run a £60 million funding round at a 37.5 percent devaluation on its 2019 round, to keep the business afloat. International plans have been put on hold, while the company waits out the pandemic.
We have gathered data and statistics on Monzo users, revenue and competition. Read on below to find out more.
|Launch date||March 2015|
|People||Tom Blomfield (co-founder and president), TS Anil (CEO), Gary Hoffman (chairman)|
Source: Business Insider
* Parentheses indicates loss
Monzo Total Transaction Volume
Monzo Total Funding
* 40% cut off value due to COVID-19.
Monzo Average Deposit
Monzo Annual Customer Contribution
* Parentheses indicates loss
Monzo Age Demographics
|18 – 34||72%|
Monzo vs Revolut vs Starling
UK Challenger Banks App Revenue
UK Challenger Banks App Average Deposit
UK Challenger Banks App Average Contribution
Other key Monzo stats
- Monzo’s 2016 crowdfunding campaign remains the fastest funded, reaching its goal in 96 seconds
- In 2019, Monzo was signing up 200,000 people each month (TechCrunch)
- Monzo is the third most valuable fintech startup in the UK, behind Revolut (£4.2 billion) and OakNorth Bank (£2.1 billion); ahead of Starling Bank (£1.3 billion) and Atom Bank (£530 million)
- Monzo lost 37.5 percent of its value in its most recent funding round, dropping from £2bn to £1.25bn (FT)
- Monzo customers average deposit was 152 percent higher in 2019 than the year before (Sifted)
- Monzo employs 1,500 people, with three locations in the UK and US (Owler)
- 1 in 4 people in the UK have one challenger bank provider, Monzo being the most popular among 22-37 year olds (CREALOGIX)
- Almost 75 percent of Monzo users are under the age of 34 (YouGov)
- In 2018, Monzo held over 50% of the challenger market, beating rivals Starling Bank, N26 and Revolut (ThisisMoney)
- Monzo uses 1600 core-banking microservices on Amazon Web Services (AWS)
- Monzo has 121,000 Twitter followers, more than HSBC (86,000), Nationwide (80,000) and Santander (74,000)
- The Monzo app is more popular in France and Germany (where it’s not available) than the United States (SimilarWeb)