Monzo isn’t like most banks, as should be clear to anybody who visits its new offices near Old Street Roundabout. It has all the bean bags, beer kegs and table tennis tables a punchy new start-up could need and there’s barely a grey hair in sight. When I meet its CEO and co-founder Tom Blomfield (in a doughnut-themed meeting room) he’s out of breath after his previous appointment overran – he rushed back to the office on a Boris bike rather than wasting money on a cab.
But Monzo is a proper bank nonetheless – ‘the bank of the future,’ according to its website. Since it launched two years ago the start-up’s customers have had to make do with a basic pre-paid debit card that can’t be used to set up direct debits or standing orders. But last month the preliminary restrictions on its shiny new banking licence were lifted, meaning it’s now free to offer full-blown current accounts, the first of which are scheduled to be launched later this year.
It’s not unique as a challenger bank, of course. Nowadays customers fed up with the big four have plenty of choice, from Handelsbanken with its focus on ethics and long-termism to Metro Bank’s enticing branches, which are open seven days a week. What sets Monzo apart is its smartphone app. Most banks have these but they’re often clunky and offer only a small number of functions. Using Monzo, you can tell the app is the focus of what the company is trying to offer customers and not an add-on dreamed up in a big bank’s digital department.
Your balance updates in real time, so those watching the pennies can keep a much closer eye on what they’ve spent, and you can send money to other Monzo customers in your phone contacts without having to fiddle around with sort codes and account numbers. Misplaced your card? You can put a temporary freeze on it in case you find it at the bottom of your bag a few hours later.
The app automatically puts your spending into categories like groceries, eating out and transport so you can keep track of where all your cash has gone and you can set yourself a target budget for each category (seeing how much I spend per week on Pret sandwiches has certainly given me fresh impetus to start making my own again). There are zero fees, even when you use your card abroad. Thus far Monzo has attracted more than 175,000 customers and £35m of investor cash, including £3.5m through crowdfunding site Crowdcube.
That’s all well and good but what’s to stop the likes of Barclays and HSBC changing tack, splashing a tonne of cash on developers and outcompeting Monzo? ‘Our ideas are not unique at all, they are not novel,’ says Blomfield. ‘[But] It’s not about having better ideas, it's having an ability to execute - and that's more complicated than it sounds. It's not just a technology problem, not just that their systems are clunky and old, it's also a business model problem, a legacy thinking culture.’ Big banks could get rid of foreign transaction fees, he suggests, were it not for the fact their business model is all about squeezing every ounce of revenue from customers.
Monzo has its own plans to make money, of course. As well as in the traditional manner – lending out depositors’ money and charging interest on it – Blomfield sees an opportunity in customer data. ‘That is the future of the bank,’ he suggests. While those who don’t want their spending habits to be used for marketing purposes should be able to opt out, he reckons those who embrace it could reap big benefits. Spending more than you need to on energy bills? Monzo could propose switching to a cheaper provider, for instance.
A bank that exists solely on your smartphone might be appealing to tech-savvy early adopters, but isn’t there a benefit to having branches in the real world too? ‘Normally [when you go into a branch it’s because of] a problem that you need to fix. If there are no problems then you don't need a branch anymore.’ For those occasions where you might need to speak with somebody – like closing a dead relative’s account or applying for a mortgage – Blomfield suggests a phone call or video chat should suffice. ‘People confuse digital banking with having no humans involved at all, but you can have a very deep, informative conversation with a human being over a mobile phone.’
Monzo’s headcount is now around 90 and growing – there are 13 vacancies listed on its website. While every tech firm struggles to find enough great candidates, there are clearly some advantages to being one of London’s most high-profile and well-funded start-ups. ‘We have about 100 applicants per job,’ says Blomfield. No doubt a good chunk of those are former City workers keen to do something more interesting with their lives, but ‘we have problems hiring people from banks sometimes because they are so trained to think in a certain way about financial products – we want people who are a little bit more open minded.’
The other attributes Blomfield looks for in new hires are ‘being really smart, being inquisitive and not just doing something because it's best practice, because everyone else does it, but continually asking why.’ But he’s wary of having too many boxes to tick.
‘A lot of tech companies talk about cultural fit in the recruitment process, and that can be code for hiring people who are like me. It's a way you can get very monolithic cultures, where everyone looks the same, thinks the same, speaks the same. And so I think a better way of thinking about it is each new hire should bring something to the culture - be culturally additive, not culturally homogenous.’
While Monzo has the feel of a start-up, its work isn’t child’s play and like its counterparts in the City it has to comply with a lot of regulations to make sure its customers’ cash and data is kept safe. Melding those two sides of the culture is a challenge that requires clever solutions. If a member of staff is caught committing the cyber security no-no of leaving their computer unlocked while they pop to get a drink, they have to buy the whole team a big box of doughnuts.
Blomfield previously co-founded the direct debit provider GoCardless, which was a member of the renowned Y-Combinator start-up accelerator. He’s very dialled in to that Silicon Valley techie mindset. He’s a fan of The Lean Startup and other inspirations include YC’s founder Paul Graham, veteran VC Marc Andreesen and, of course, Elon Musk. ‘That man has gone to the future and come back.’
Established start-ups with a fanbase as large as Monzo’s will inevitably attract acquisition offers but Blomfield seems determined not to throw in the towel for a big pile of cash any time soon.
‘I genuinely think we will build a hundred billion dollar business if not a trillion dollar business in this industry,’ he says.’ Your finances are one area that technology hasn't really made seamless in the same way that transport, music or whatever has really made seamless. There's space to build a really enormous company that has a positive impact around the world. Selling to anyone is a sign that you haven't accomplished that.’