Monzo: A tale of hype vs reality

Rewind to 2018 and my friendship group was abuzz about something previously unthinkable: a financial services firm.

WhatsApp groups saw mates with no prior interest in financial services extol the virtues of a firm only founded three years prior. Nights out saw the same friends flaunting a coral-coloured card as though it were the latest iPhone.

I am of course referring to Monzo, the neobank that along with a number of other new entrants including Starling, looked set to redefine retail banking. Down with the incumbents and their legacy IT systems, unfair and opaque fees; in with digital-only, cool brands.

Although the Monzo story is not over, the narrative has somewhat changed from the heady days of 2018. The recent Sunday Times headline encapsulates this shift succinctly ‘Monzo’s bark turns into a whimper’.

I was a sheep

I hold my hands up and admit I was a full-blown Monzo sheep.

My mates had the card, so I had to get it too. Other than free international cash withdrawals, I didn’t really look into – or care much – about why it would be of use to me. So when a friend sent me a golden ticket allowing me to sign up to Monzo and open an account straightaway, I leapt at the chance.

Shortly afterwards the card arrived and quickly found its way into prime place in my card carrier – at the front, so as soon as I pulled it out anyone nearby would likely see that I was a Monzo man.

For a few months, I proudly used my Monzo card as my everyday card, ensuring I had transferred enough from my main current account (like most, I wasn’t prepared to go the whole hog and have my salary paid into my Monzo account; not yet anyway).

It was good. I like contactless, the international free withdrawals were handy on a few trips abroad and sending money to others via the app was very straightforward. These were – and despite some tweaks to the international withdrawals – still are real positives.

But was it enough to fully embrace team coral? To actually ditch my long-standing current account provider? Were additional services, including the offer of loans, enough for me to fall properly in love following the honeymoon period? Would a round of crowdfunding tempt me to go all in and make it my main account?

The simple answer is no.

The reasons are simple too. Firstly, I’ve just never really seen the benefit of doing so – what could I get that I couldn’t already? And secondly, rightly or wrongly, it always felt like a risk.

I am obviously a sample of one, but I suspect I am not alone in drawing the same conclusion.

A masterclass in brand-building   

Much has been written in recent weeks about Monzo’s future following its latest annual report which showed losses of £113.8m in the year to March. Its fundamental lack of ability to make money, particularly through lending, has been exacerbated by a drop in transaction fees owing to the Covid-19 pandemic.

However, while not ignoring the commercial reality of running a profitable and sustainable business, we can still say that Monzo has had some degree of success if judged by its ability to have caused such a positive buzz in the early years.

Yes, the WhatsApp group chats with friends have certainly moved on from before (it might need some new friends if they hadn’t), but the fact it ever dominated conversation speaks volumes.

While making a splash doesn’t equate to success, Monzo no doubt provides a powerful blueprint for those looking to garner rapid consumer interest.

For now, while the coral card may no longer take pride of place in my card carrier, I look forward to seeing how the story unfolds from here on out.