Monzo history

Monzo Bank Limited is a revolutionary neobank with a core mission to facilitate customers’ spending and saving processes. Monzo relies on convenience and intuitive design.

‍History of Monzo

Monzo is one of the largest fintech players in the UK market. It was founded in 2015 by Oxford graduate Tom Blomfield. It has gained momentum as one of the leading neobanks whose main features are the absence of physical branches and an emphasis on communication with the user through a mobile application.

Nowadays, the company’s core service is a bank account with a connected debit card and mobile app.

Thanks to its customer-oriented approach, easy-to-use mobile app and smart community outreach, the startup has gained more than 2.5 million customers and grown into a serious rival for UK-based fintech-startup Revolut with roots – criticized for rigid corporate culture and questioned origins of investor money.

Student startup and corporate job

Tom Blomfield founded his first business while a student of law at Oxford. Blomfield and his colleagues founded the Boso startup (buy-or-sell-online) but, when the Startup was invited to an accelerator by the well-known American startup accelerator, Y Combinator, Blomfield decided to leave the business.

According to himself, he did not want to take any risks, thus he finished his studies at Oxford, acquiring both bachelor’s and master’s degrees.

Without any clear idea about what he really wanted to do, Blomfield spent three years in the management consultancy McKinsey and Company: he remembers this time as far from the happiest in his life.

One of the reasons is because Blomfield gave all his time to his job, spending 90-100 hours a week at it, while the entrepreneur values work-life balance. To the question of what he is doing every day, Blomfield answered that he likes to play Starcraft, cook with his girlfriend, and does not see the point in getting up before 8 o’clock in the morning.

In 2011, Blomfield and his university friends founded GoCardless, whose main product is to provide Direct Debit to business customers.

Like his very first startup, GoCardless managed to get into the accelerator program of Y Combinator, though with certain problems in raising seed capital in the early stage. This time, Blomfield showed interest in developing the company further and travelled to San Francisco.

However, Blomfield admits that the same as consulting, working on GoCardless was not what he was ready to do in a distant future in five to ten years. Leaving the company, Blomfield joined the Grouper team, which worked on a platform of offline meetings between different groups of users based on their Facebook data.

Despite Blomfield’s departure and those early teething problems, GoCardless continues to thrive: in February 2019, the business raised a further $75 million from investors including Adams Street Partners and Salesforce Ventures.

Blomfield also does not disagree that his privileged upbringing played a big part in his entrepreneurial success. Having attended a top private school and Oxford, Blomfield realized that, unlike many entrepreneurs, leaving the corporate world to found GoCardless meant he had taken no risks and could always move back home with his parents, to live in their garage.

He didn’t have to live in a garage: after a year at the since-shuttered Grouper, Blomfield joined the team of former top executive of Holland’s biggest bank ABN AMRO and Royal Bank of Scotland Anne Boden and her fintech startup Starling Bank, there beginning work on the technical side as Chief Technology Officer.

In GoCardless, he wrote the whole backend part, and since his childhood, he had already been interested in programming, so, immediately Blomfield was turned on by the chance of working with a product which would actually be a rival to banks.

It was the idea behind Starling Bank, which would later become Monzo, to develop a service that could compete with traditional banks for their slowness, high fees, and the need to go to a bank branch when one needs to make any transaction with his account.

Yet six months later, Blomfield left the project. The industry said he had a falling-out with Boden, but the former chief technology officer of Starling Bank prefers not to talk about the reasons. Blomfield studiously avoids answering the question about the reasons for his leaving and says only that there are things he cannot discuss with the press, and the conflict with Bowden is among them.

Starling Bank itself, which Blomfield worked on, was a response to the very conservative nature of British retail banking in the early 2010s. Anne Boden, founder of Starling Bank, was among the first people who opted to tear down the banking service and make the mobile app the only means of managing her account: all account transactions were performed through the mobile app.

First Direct was a subsidiary of British giant HSBC, which pioneered such an upheaval in the classic branch-based retail banking model, communicating with customers exclusively through the phone and online. In any case, nobody had ever attempted to make the mobile app the only formal channel of communication between the bank and the customer.

Founding Mondo and attracting the first investment

He left Starling Bank because he and Boden had a difference in vision, so he founded his own fintech startup then called Mondo-which later changed its name to Monzo.

One of the real strengths Blomfield had as an entrepreneur was an ability to bring great teams around him. When Blomfield left Starling Bank, the following people joined him: Chief Technology Officer Jonas Templestein, Head of Customer Service Jason Bates, Head of Risk Paul Rippon, and Chief Financial Officer Gary Dolman.

Most of the co-founders of Mondo were older than Blomfield and had great experience working for traditional British banks.

Unlike previous projects, finding seed investment for Mondo was not a big problem. One of the first venture funds that invested in the startup was London-based Passion Capital.

As fund partner Eileen Burbidge later remarked, her fund was originally going to invest in Starling Bank but finally decided to fund Mondo – largely because of Blomfield’s personality – who showed no fear of possible problems with financial regulators and – in Burbidge’s words – oozed ambition.

All in all, Passion Capital invested £7m in the Blomfield startup.

Crowdfunding and customer engagement as shareholders

Mondo completed the crowdfunding campaign, through Crowdcube, on 3rd of March 2016 and as usual reached the desired target of £1 million. It took Mondo 96 seconds to raise the funds-the fastest crowdfunding campaign ever.

Blomfield himself said that his company passed on major international investors because he and his team wanted this new round of investment to involve direct users of the service, which at the time was in the process of obtaining a banking licence and was in the alpha stage of testing.

Mondo became the first banking service in the UK that allowed its customers to become shareholders via crowdfunding. The average investment was £537-the amount invested per participant had been capped at £1,000 as Blomfield wanted as many users as possible to share in the company.

Thus, 3.3 percent of the firms’ shares were shared with 1,861 investors, and through a record crowdfunding campaign, Mondo was able to let itself be known to a broader audience.

Colour as a badge of honour

The company was active in beta-testing both the app and the payment cards internally amongst the first customers. Before receiving the approval of a financial regulator and a banking license, Mondo was offering prepaid debit cards in bright coral color, later to be named the color of 2019 by the Pantone colour institute, which later became the main distinctive feature of the company.

It was never intended for bright neon coral to be used as a main color, explained Hugo Cornejo, the vice-president of the design department. The first batch of test cards was to be in a bright colour only, just like carmakers paint demonstration concept cars in bright colours to attract the public’s attention.

But customers liked the coral color so much that it made the design team make coral the main color.

The customers played a decisive role not only in the color of the card but also in the name of the company-in 2016, shortly before getting the banking license, the company reported that it sought a new name for itself. Due to problems with the rights holders, the original name Mondo had to be changed-they had registered a trade mark under a similar name before Blomfield’s company became active.

Users as a part of the company

The company announced a contest for a new name among users. Monzo turned out to be the most successful variant, and all customers who suggested this name received a corporate hoodie with their suggested name.

Later on, it was a common thing for the company to seek advice from users and to get feedback from customers. The employees of the company were actively communicating with customers on its forum, and users suggested modifications to the product-everything from minor changes in the user interface to the commission structure.

Interface of Monzo application

Users were also listened to thanks to the voting system: in the forum, a topic with a request for a particular improvement can be supported or, on the contrary, omitted, considering the proposal unnecessary and unimportant.

Active growth and “unicorn” status

Two years since it was founded back in 2015, and a year since it landed an unrestricted banking license, allowing the company to open current accounts for its customers and issue regular debit cards, not prepaid cards, it has attracted more than 200,000 active customers.

The flow of customers reached 25,000 new accounts per week. By the middle of 2019, it was serving more than 2.5 million customers active in the UK alone. Later on, Blomfield focused on expansion in the US, where the company has already managed to open an office, which will further expand the circle of clients of this service.

It stays true to its fundraising ethos: Monzo has raised funding from funds such as Thrive Capital, Orange Digital Ventures, and Goodwater Capital but still brings crowdfunding into the fold.

In 2017, Blomfield and his team raised £2.3m from 6,400 investors; in 2018, Monzo raised £20m in two days with the help of 36,000 independent investors who showed interest in the crowdfunding campaign.

The year 2018 was pivotal in terms of how much the company Monzo was valued for. The valuation rose to Unicorn status, £1bn ($1.31bn), after the close of another £85m round and funding from Accel Partners and General Catalyst Partners.

Capacities Limitations of Monzo

Even after being licensed as a bank, most of its customers are not taking the risk of using Monzo as their sole and primary bank. Most of its customers in the UK still draw their salary into their classic retail bank account and use Monzo as an ancillary service.

The list of available financial services is also far from traditional banks with branches: Monzo does not provide lending services for its customers, unlike similar German N26 and British challenger bank Atom Bank, which focuses on lending to customers, providing them with mortgages among other things.

Monzo’s goals

• Monzo collaborates with new services for more and more services; the most outstanding example is its collaboration with Transferwise for low-cost international transfers. It actively develops integration with IFTTT.
• As well as being routinely ranked among the best places to work, and boasting top-ranked engagement among clients.
• The company has also continued to raise funds for growth with success: closing another round of investment, it managed to raise £113m from a group of US investors led by Y Combinator and overtook its main competitor, Revolut, in terms of value.

It is now valued at £2bn – the second most expensive fintech startup in the UK behind OakNorth, an online business lending platform and the second most valuable challenger bank in Europe after Germany’s N26.

Start-up founder Blomfield seeks 1bn customers globally.

Monzo products and services

Monzo offers the following unique banking services:

• Current account: all-purpose account with no foreign usage fee.
• Account for 16-17 year olds: adapted features for young people.
• Joint account: the convenience of managing joint finances with a partner.
• Business account: an offer for individual entrepreneurs and legal entities.

History of the company’s development by years

Financial performance

Revenue: Expanding to £355.6m in 2023, reflecting business growth, whereby successful expansion of the loan book occurs.

Net profit: -£116.3m reduced losses, profitability that the bank attained in the first few months of the year 2023.

No. of Employees: 2,432 employees in 2023.

Market position

In the year 2023, the entity is regarded as the seventh largest bank in the United Kingdom with 7.4 million customers, while in its market building process, total customers deposits stood at £6bn.

Innovation and technology

Monzo has been active in innovation, providing APIs for developers and including advanced technological solutions in its financial products.

Expansion and acquisitions

The company is expanding geographically to cover not only the UK market but also US territory. In the latter, the company wants to strengthen its position by signing strategic partnerships and introducing innovative financial products.

Corporate Responsibility and Sustainability

About corporate responsibility and sustainability, Monzo is not distinguished by particular actions, but its philosophy of banking services and transparency in customer treatment may be regarded as an enough contribution in this respect.

More Facts and Figures

Monzo reveals a growth in lending operation, a strong boost in net interest income and credit risk management.

Monzo Services

• Early access to payroll: Get your paycheck one day in advance with no extra fee.
• Salary sorter: Facility to distribute funds amongst various needs.
• Bills Pots: Keep track of bill payments and enable automatic debits for them.
• Instant notifications: Detailed information on expenditure in real time.
• Direct debit: Notification about upcoming payments on account of direct debit instructions.
• Rounding transactions: Every transaction is rounded off automatically to build up savings.
• Zero fees abroad: Use of the card abroad with no additional charges.

Monzo Licence

It is an internet-only digital bank offering services in the UK. In April 2017, it was granted an entire licence of banking by the PRA -Prudential Regulation Authority -and the FCA -Financial Conduct Authority. As a fully licensed bank, it is bound by these financial regulators under authorization and regulation, ensuring that it lives up to the standards and regulations accorded to other banks in the UK. If your team is working on a similar project and would like to obtain an EMI licence in the UK, then the lawyers at Regulated United Europe would be happy to assist you.

A Little Monzo History

Monzo was founded in 2015. It only offered one product at the time it entered the market, which was a MasterCard bank card that could be reloaded via its app and used for free international money transfers. Through the years, Monzo managed to attract more than 7 million customers who abandoned traditional banks like Barclays and HSBC and have become active Monzo users.

Monzo claims to be a bank in your smartphone. No physical bank branches or outlets-whatever transaction is totally online and maintained through a mobile app. To open an account, all you have to do is download and install the app on your smartphone, complete a simple verification process, and you will get a unique Hot Coral Mastercard bank card in the post. You will be provided with a full UK bank account, the opening of deposit accounts, and credit line facilities. All this while your money is covered under an FCA licence. These features make Monzo especially appealing to those who are only temporarily staying in the UK or have lately come to the country because the bank doesn’t require any proof of address to open an account, unlike traditional banks. What is more, with Monzo, it allows its customers to perform low-cost international transfers in a number of currencies by setting the TransferWise service into its app.

How Monzo Works

Monzo offers a variety of bank accounts, including personal, joint, and business accounts. If you have a personal account, then you can enjoy all the services typical of a regular bank account—for example, receiving your salary through Monzo, making monthly automatic debits for utility bills, pulling out cash from an ATM, and sending international money transfers. Monzo also allows the option to create deposit accounts.

Flexible Deposit Account

Easy Access Saving Pots Fixed Deposit Account – Fixed Saving Pots. The Easy Access Savings Account earns up to 0.80% on balance, and you still have free access to cash in the account. You need a minimum deposit of £10 to open a deposit. You pay up to an APR of 1.15% on the balance in the fixed deposit account, but you don’t have free access to the money in that account. The minimum deposit term is 3 months, and the maximum period is 12 months.

As far as ATM withdrawals go, you can take out up to £200 anywhere in the world every 30 days for free. You will be charged 3% on anything above the limit of £200, although you are not charged when using the card in Eurozone countries. Account holders can activate an overdraft that acts like a credit limit on their account, up to £3,000. The interest rate over overdrafts, depending on your credit rating—which you can check directly in the app before you submit an overdraft application, is 19%, 29%, or 39%.

Monzo Business

Monzo provides business banking that suits the requirements for small businesses and freelancers. Business accounts help customers manage their finances more easily and efficiently. Following are some of the main features of business banking with Monzo:

Business banking with Monzo is particularly famous among startups, freelancers, and small businesses because it emphasizes being digital, easy to use, and full of features meant to ease money management.

Opening a Business Bank Account with Monzo

Opening a Monzo business bank account is easy and fully digital. Below are the basic steps involved in opening an account at Monzo:

Application Download: Download the Monzo application, available in either the App Store or Google Play Store.

Sign Up: Launch the application and register yourself by following the in-app instructions. Basic personal details like name, address, email address, and phone number are required.

Proof of Identity: Monzo will verify your identity to meet banking regulations. This usually involves taking a picture of a valid government-issued ID, such as a passport or driver’s license, along with selfies.

Providing Additional Information: If necessary, you may be asked to provide further information about your employment status or income.

Account Setup: After identity verification, you can set up your account, including setting up a PIN for the card and customizing features relevant to the account.

Account Activation: Once these steps are performed, your account is generally activated.

Receipt of Debit Card: Monzo will mail the debit card to your provided address. This may take a couple of days, and the card will need to be activated through the app.

Funding Account: You can top up your Monzo account via bank transfer, payroll deposit, or other methods within the app.

Start Using Your Account: With an activated card and a funded account, you can start using your Monzo account for financial transactions.

Note that requirements and steps may vary depending on your location and any updates in Monzo’s procedures. It’s always prudent to check the latest information directly on the Monzo website or app.

Apply for a Monzo Card

Applying for a Monzo card is easy and mostly digital, done through their mobile application. Here’s what you’ll need to do:

Pros and Cons of Monzo

How to Open an Account with Monzo

You have to be resident in the UK to open a Monzo account. In the near future, Monzo cards will also be available to US residents. To open a Monzo account you will need a smartphone with an internet connection and ID – passport, driving licence, ID card or other photo ID. Install the Monzo app on your smartphone, fill out the application form and in just a few days you will be sent – by post and free of charge – a bank card which will be linked to your bank account. Monzo also offers the option to open such an account for underage users aged 16 to 17 years old. 16/17 account. The only difference between the 16/17 account and a standard account is just that certain expense items are blocked, such as fees for gambling and so on. It does not require proof of permanent UK residence or domicile to register for an account, and it also does not need full verification.

Joint, Savings and Overdraft Accounts at Monzo

Monzo does allow you to open a joint account. It works similarly to a standard current account, except that you’ll get two debit cards – one for you and one for your partner. You can toggle between being on a personal account to a ‘partner’ account through the app. There are a number of savings account options through Monzo:

• Flexible Deposit Account – Easy Access Saving Pots with free access to the account balance, with up to 0.8% p.a.
• Fixed Deposit Account – Fixed Saving Pots access to funds after the end of the deposit, with 1.15% p.a.

Monzo also allows creating unlimited numbers of savings accounts for different purposes (“saving pots”) with no balance %. Every customer of Monzo automatically receives a free technical overdraft up to £20. The usage fee for the technical overdraft is £0.5 per day (but up to a maximum of £15.50 per month). If you want, you can increase your card overdraft to £3,000 on application.

Monzo Fees and Commissions

There are no fees for opening or maintaining a current account with Monzo. Cash withdrawals and any card payments within the UK will be free of fees. Card payments outside of the UK will also be free of any fee and currency conversions will be at Mastercard’s standard exchange rate – with no additional fees.

• UK cash withdrawals – free (Cash withdrawal limits £400 per day and £5,500 per month)
• Cash abroad – first £200 in any month free. Then 3% on each withdrawal
• Cash top-ups – You can top up your account at PayPoints. The fee is £1 per transaction. You can deposit up to £300 per day and up to £1,000 every six months

Moreover, in case of an overdraft on the card – if you spend over the balance – you will be charged £0.5 per day but not more than £15.50 per month. That means fees are also paid when you send an international money transfer abroad. Monzo has integrated features from Transferwise in its international payments app: you can convert currency when you send a transfer at the real mid-market rate. The overdraft service is available with Monzo; you can turn it on in the app. Insert your address and income, and Monzo will make its own credit scoring and set an overdraft limit. This depends on your salary and credit history, and can be as much as £3,000. Your annual overdraft interest rate could be 19%, 29%, or 39%, depending on your credit rating.

Monzo Security

Monzo Bank Ltd was granted a license in the UK by the PRA – Prudential Regulation Authority and is regulated by the FCA – Financial Conduct Authority. The FSCS, that is, the Monzo Deposit Compensation Scheme, protects funds in customer accounts with the bank up to £85,000. If you use a joint account, the compensation limit will be increased to £170,000. It has been rated as a great bank voted by Which.co.uk and has received an outstanding 4.5/5 stars rating on the popular customer review website Truxtrilot.

Competitors of Monzo

Is Monzo the best solution among mobile neo-banks? It is enough to compare offers from major competitors to make the final choice:

• If you are European and in the US, only N26 or Monzo is available for you
• Revolut imposes an additional commission of 1% for currency conversions on weekends
• If you frequently send international transfers, the TransferWise card will be the best choice

Its biggest rival is still Revolut, already offering a free bank account in one of 10 currencies, free transfers at interbank rates in 23 currencies, and free cash withdrawals from ATMs up to £200 per month with a 2% fee, which is just a bit more favourable than Monzo. Also, Revolut provides the opportunity to purchase Bitcoin, Litecoin, and Ethereum cryptocurrency and some shares of leading world companies right in the application. The second competitor is the Borderles Account multi-currency card issued by TransferWise. PDD tariffs are very similar to the Revolut card, but with TransferWise, you can send international transfers to more than 170 countries around the world, and the conversion takes place at an average market rate. And the main plus – the Transferwise card is available outside the UK.

Monzo Mobile App

Monzo has an extremely handy mobile app that allows you to easily control and track your daily expenditure. The application itself consists of several tabs:

• Home – it gives the current balance and the amount of money spent today. All expenditures are listed chronologically, and in every position in detail there is extra information about the address of the shop, history of payments, receipts, and notes.
• Summary – this is the section summarizing a monthly budget. There are twelve categories of expenditure: general, transport, groceries, catering, hygiene products, utility bills, finance, entertainment, expenses, family, holidays. Every payment automatically goes to the corresponding category and at the end of every month you can easily see how much you have spent on each position.

Monzo Plus

Monzo Plus is a premium option that was launched in 2019. The users of the Monzo Plus tariff will be able to use broadband, life and property insurance, mobile device insurance etc.) If you are a frequent traveller, then with the Monzo Plus service it will not be difficult to get travel medical insurance costing £4 per month via a mobile app. It also comprises the free six-month subscription to Jack’s Flight Club and access to airport lounges. What’s more, subscribers to Monzo Plus will have the chance to get into exclusive events in London hosted by the company, while all will be able to choose an exclusive personalized design for their cards. The Monzo Plus ‘early bird’ offer will charge its customers an additional £3 a month for the first year of the program, followed by £6 a month starting from the second year onwards.

Summary

Monzo is undoubtedly one of the most popular mobile banks at which to open an account in the UK, and for good reason. On the whole, this is a very easy service to use and set up. An iOS/Android mobile app is provided for account management, again as user-friendly and intuitive as possible. The only perceived drawback with this bank is the £200 limit on free cash withdrawals from abroad ATMs. For most Monzo users, this is not a problem; however, if you are regularly traveling to countries where cash transactions are common, you should consider competing offers like the German bank’s N26 card or TransferWise.

If one decides to start a fintech company in Europe, the lawyers of Regulated United Europe can assist in getting a financial license such as Monzo, N26, or TransferWise and also provide intermediary services in buying a ready-made company with an Electronic Money Institution license in Europe.