Tell us about your journey to Monzo
I always knew I wanted to start a company from a very young age. My dad was an entrepreneur and started his own company. I started a number of companies in my teenage years at university. The first serious one was called Go Cardless, which was a payment processor that I built with two friends from university. That really taught me about how money moved around the system. But it didn’t speak to me on a personal or emotional level; it was a back-office service for businesses to help make them more efficient – which was great, but not something I was passionate about.
I then went to work on a dating website, which taught me so much stuff about human emotion and the value of brand.
Monzo was bringing those two things together. Moving money around, but not the cold and dispassionate way that a lot of banks think about it – understanding people’s emotions and what their anxieties, hopes, dreams and fears were, and tapping into that. All of that combined with a really strong sense of purpose and mission.
Monzo felt like a problem that my friends and my family had. Everybody has to have a bank account and yet they didn’t seem to work well for human beings. They work OK for banks, but the customer is almost seen as an inconvenience. Creating something that makes peoples lives easier is hugely rewarding.
How have people responded to Monzo?
The traditional banking industry still doesn’t get it – “you’re not selling mortgages and so you’ll never make any money.” They’re almost too rational. The rise of behavioural economics has been fascinating, because it basically says that there are all these models about how the world works and they’re all wrong, because they don’t understand how human brains really function which is emotional. We’ve really tapped into that.
The way our customers have responded is overwhelmingly positive. We get so many lovely messages, like people who are out of debt for the first time because they finally managed to stay in control or they’ve hit their savings targets for the first time. Or even that money doesn’t cause them anxiety any more. They feel like an adult and don’t have to worry about it anymore.
Was the intention always to help create a product that helped with financial inclusion?
If we’d have started out simply to solve financial inclusion I think we’d have done it differently. We wanted to make money work for everyone, and part of that is megalomania and part of it is social mission. I think it’s the great democratising effect of technology. We realised that really early on that it would have a massive social benefit, and that was really important to us, but it wasn’t the singular focus of the company. I think it’s more powerful as a result.
We wanted to create something that the mainstream loved, but is so accessible that disadvantaged people can participate on equal terms. It’s fully democratic.
How did you unpick your social purpose?
It’s something that’s really important to us at the start. One of our team, Tristan, worked at refugee camps before he joined Monzo, and we’ve had people that have joined us from debt advice charities.
We started focusing on what we could do for our friends and our family and realised pretty quickly that this could benefit a bunch of other people. Then we had customers who came to us and said that this had really benefitted them because it’s helped them solve a gambling or a debt problem, or they were a new immigrant and couldn’t get access to a bank account easily, so it really came to us in a few ways.
Are they any common themes, whether that’s people wanting to save, or get out of debt?
Debt management is one for sure. Things like nudge notifications, being able to put money aside into pots and realtime notifications all help people recover from problem debt. We’ve introduced a self-exclusion tool and 15,000 people have opted in and turned it on. There are people who’ve told us that they’re no longer gambling. And then it’s people who’re new to the country – whether that’s affluent ex-pats and immigrants or that’s refugees or less affluent migrants. Getting access to finance for them has been really, really hard – Monzo doesn’t ask for proof of address, which I don’t think is particularly relevant.
We’ve not been able to do something really yet for homeless people and I’d really like to explore that. It’s a really complex area as homelessness is often accompanied with a bunch of other problems.
How much do your customers steer the directions of the service when it cones to new features?
Every day. But you’ve always got to be aware of the biases when you do that. On Twitter recently I tweeted “if you had a magic wand what would you introduce to Monzo?” We had 400 replies, but you have to realise that people on Twitter aren’t everyone. We also have a community forum, with tens of thousands of people on there and it’s full of new feature requests. But again, you have to realise that this group are very passionate early adopters who are very, tech savvy.
We try and do user feedback sessions in person a couple of times per week and we’ll try and recruit people who aren’t our core audience; people less tech savvy, maybe people who are older or people with much lower or higher incomes.
What has surprised you the most from these sessions?
How emotional it is. I have a law degree and I was a computer programmer and I thought people thought and acted rationally. And we don’t. It’s all of the small non-economical features that really delight people and have the biggest impact. A really dumb example is when you pay for something with Monzo you get an instant notification, which in itself you can question the value of, because you know you’ve just bought something as you’re still stood at the till. But what’s definitely irrational is that we try to match an emoji with what you’ve bought. So, if you’re in Dunkin’ Donuts, it comes up with a donut and if you’re at Itsu it comes up with a sushi emoji. You know you’ve just bought a doughnut – you’re there in the shop – but that communication is so delightful it makes you smile and tell your friends about it. It’s inexplicable.
People’s money is tied up with their hopes, dreams and anxieties.
What do you think the barriers are with the traditional banking system?
We’ve talked to younger customers and they talk about the experience of going into a bank and how difficult it can be, because they don’t want to look stupid when they say, ‘I want one of those plastic cards that lets me spend money, please?’ Our customers often tell us that feel patronised.
But even more than that, banks make customers fit around their processes and they don’t fit around the human. It doesn’t feel natural or intuitive.
For a long time people just assumed that that was because banking was hard and that was just how it worked. That’s bollocks. It’s just because because the banks haven’t thought about it from the customer’s perspective. An example is mortgages, where banks have a mortgage centre that the customer has to fit in instead of asking, “we’ve got a customer here that wants to buy a house, how do we help them achieve that?” Every interaction with your bank demonstrates how they’re not thinking about the human.
Banks are full of smart and well-meaning people and they talk the language of serving the customer and putting them in the centre of everything, but it needs a mindset shift. Their organisations are centred around product lines – so you have a mortgage person, the savings person or the credit card person, but there’s nobody who’s the ‘making customers really happy person’.
Have you begun to think differently about money?
A little bit. I didn’t realise how much I valued seeing it all in one place. I had my Monzo account and I’d saved up enough money that I cared about getting interest on it, which Monzo didn’t do. Monzo offered a marketplace where it suggested two or three savings accounts where I could put my money, and so I opened my savings account and moved my money there. And it disappeared out of the Monzo account. It was really bizarre, because I could no longer see it. One of our customers did the same and then closed his Monzo account because of it, and came back to us a month later and said, “I’m sorry, I went back to how it was before and I feel blinded!” The loss of control and visibility is so emotional.
What’s next for you?
We’ll hit one million current account customers before the end of 2018. If we don’t do anything different we’ll hit two-and-a-half to three million by the end of next year. So my challenge to the company is how we hit ten million, which would make us one of the top four or five biggest banks in the UK, by current account numbers. At the same time, we’re just about at contribution margin positive – so every new additional customer neither makes money or loses money. We’d obviously like to make money per user and so getting to profitability in the next 18 months or so is our next goal. It makes us sustainable.
Is there tension between the mission and the need to make profit to be sustainable?
I don’t think there can be. Businesses can be incredibly short term and abuse their customer base and make exorbitantly high short term profits – but it kills you in the long term. You can’t continue to abuse your customers and survive as a business. You need a really strong social mission, but without revenue and the profit, you’re not going to be sustainable. The two have to work in tandem. There is nothing inherent in either that means they should be in tension at all.
If you have a piece of advice about for someone who’s fearful about money, what would you say?
It’s about knowing where everything is and visibility. Simply knowing where you are, bit by bit can help you stay in control. Putting aside money as soon as you are paid for your bills helps and, as soon as you are able, put a bit aside every month to start building your savings.
And, try out Monzo, it might help.
Tom Blomfield is the founder and CEO of Monzo, the ‘UK’s first smart bank’.