The Monzo Revolution
Monzo (initially known as Mondo) launched a prepaid debit card in the United Kingdom in late 2015 and has grown to have one of the highest customer satisfaction rates, innovative policies and revolutionised banking.
1. Background
Deloitte has called the rise of digital-native Challenger Banks a “global disruption as they traverse borders and disrupt the status quo in most mature and emerging markets”. Today, Monzo has more than 4 million customers in the UK, and in a market with only 70 million accounts, it holds a robust 4% of the market share.
From offering free ATM withdrawals abroad, connecting with Amazon Alexa and teaming up with TransferWise for international money transfers, Monzo has left no stone unturned when embracing its digi-savy identity.
2. Big Bank Stereotype
The same year Monzo launched, data from the Millenial Disruption Index revealed that 71% of millennials would instead go to a dentist than engage with banks. One-third of respondents said they didn't believe they would need a bank in the future, tired of slow and impersonal service. Monzo saw this as an occasion to design solutions to mainstream bank problems, largely supplemented by a unique digital presence — through an app, advertising and customer interaction. However, even Monzo Community Members have acknowledged that it isn't the only bank trying to achieve this, so staying ahead of the game will have to be supplemented by impeccable customer and banking services.
3. Turning a problem into an advantage
After its launch in 2015, Monzo’s customer base was around 5000 prepaid users. However, this shot up to 100,000 users in less than two years, fueled by Monzo’s referral engine. This was when referrals for cards were uncommon, and Monzo channelled the dissatisfaction among banking consumers and turned that into an opportunity for word-of-mouth referrals. However, this relationship marketing could turn sour if not maintained. Monzo’s product score, which analysed fees and rewards, has been lower than other banks like Starling, which may dissuade customers.
4. Digi-focus
Monzo has embodied itself as a digital-only alternative to traditional banks. Technology integration has offered transparency and service at a lower cost for them and the consumers. According to Harvard, the digital-only model also lets it run on learner operation, on 30% of its cost base. A lack of physical branches means Monzo avoids additional costs for running a branch and invests more in technology, but paying in cash or withdrawing large amounts of money is tricky. Monzo acknowledged this and partnered with companies like PayPoint, to bridge this gap which I have personally used and find convenient.
5. Dynamic Design
As a Monzo user who switched from a more “mainstream” bank, a large part of the Monzo experience is the UX interface. I can see an immediate push notification when a transaction is made, with a map of the location and a handy emoji to describe what kind of transaction it was. The Monzo digital experience lets me freeze a card immediately with no supplementary security codes or long calls with automated bank handles, and can set budgeting targets each week to make sure I am not overspending.
6. A card can go a long way
When you think of Monzo, you think of a neon orange card..or, as they call it, hot coral. This design was not a coincidence but a carefully curated way to grab people's attention. Hugo Cornejo, the head of design, commented that they wanted something people would ask about when used in a restaurant and emulated their digital persona. As a Monzo customer, I always get asked about the card when I use it, giving them free marketing just through how it looks. Coincidentally, coral was also Pantone’s colour of the year in 2019, with Monzo also winning on the neon trend and checking multiple boxes.
7. Innovative Digital Marketing
The digital marketing team at Monzo saw humble beginnings with displays in the London underground in 2018. Monzo had spent 600% more on marketing in just a year by 2019. A few months later, Monzo launched a wildly successful TV campaign which attracted over 250,000 users in one month alone. Monzo clearly uses digital media and technology to present what it stands for, which means customers actively engage with their complaints. Data from the Financial Ombudsman revealed 1392 complaints about account closures were made in 2020, and finding a robust mechanism to solve this will be imperative. Sameen Khan wrote about how most banks used social media very restrictively, Monzo naturally paves the way for more holistic and innovative use.
8. Customer Interaction
Monzo has a stellar reputation when dealing with customers. They go beyond the usual customer service opportunities by preempting consumer problems. For instance, British Airways had a significant data breach in 2018; Monzo was able to identify affected consumers and automatically order replacement cards and even left in-app messages explaining what had happened.
9. Not all smooth sailing
Although Monzo had a great reputation amongst customers, in 2019, less than one-third of Monzo’s British customers were using it as a secondary bank account. Monzo will have to create a strategy that ensures customers do not use it alongside a main current account to secure permanence. This is underpinned by the economic volatility caused by the COVID-19 pandemic and, subsequently, cautious customers who would rather stick with high-street banks due to their reliability and security. Moreover, data from YouGov BrandIndex illustrated that during this time, Monzo had to lay off employees and had doubled losses.
The Covid-19 pandemic interrupted Monzo’s plan to expand into the American market and forced it to diversify specific revenue streams.
10. What does the future hold?
Monzo has launched a business account to combat challenges and entered the business banking market to attract small and medium-sized businesses with its user-friendly baking platform and innovative features. The bank must also take active steps to close the gap between its revenue and losses while persuading customers to use them or the high-street traditional banks.
