Building a smart bank; From crowdfunding to reality

3 October 2017

The so-called ‘challenger’ banks have certainly made quite an impact on the UK banking landscape. Last year KPMG reported that against several key measurements challengers continue to outpace the big five. For instance, challenger banks had increased lending by 32 per cent compared to a 5 per cent decline for the big five.
Monzo Bank, having quadrupled its customer acquisition in six months, is shaking off the ‘challenger bank’ label, becoming a force to be reckoned with in the financial services market.

Tom Blomfield, CEO at Monzo Bank, who will deliver a speaker session titled ‘Building a smart bank; from crowdfunding to reality’ at PayExpo Europe 2017, taking place 4 & 5 October at London’s ExCeL, discusses the journey so far.

“20 years ago, you got a bank statement once a month; there was very little you could do with that. Then, the internet revolution arrived and you still got a bank statement which you could do nothing with, then mobile banking appeared and guess what? You still received a statement that you could do nothing with.

“What makes us different is that, instead of a static piece of paper that has little value or use to customers, Monzo believes a banking statement should be fluid and connect you to your money. For example, current account users are able to see their outgoings segmented by categories e.g restaurants, entertainment, allowing customers to better manage their finance and track spend.

“We also help users save money by automatically checking direct debits against competitors, so if you are gouged by your energy provider for example, we’ll will inform you via notification, check for a better deal and allow you to switch in real time.

“If a potential customer wants reassurance that their money is safe in a digital bank, we tell them that Monzo is regulated by the Financial Conduct Authority the Bank of England’s Prudential Regulation Authority (PRA), meaning we are held to the same high standard as traditional banks - all individual accounts of up to £85,000 are guaranteed by the British government.

Keeping systems ahead of rapid growth rate

“In creating Monzo, the toughest obstacle we had to overcome was getting a full banking licence. It’s been a long and expensive process with many regulatory hurdles to overcome. Now that we are up and running our priority and key challenge is to create the right systems to support our exponential growth rate. In January this year we had 100,000 users, today we have 400,000 and in six months we are predicted to have 1 million.

“Looking back at our crowdfunding experience, it was remarkable. We began in February 2016, raising £1 million in 24 hours and breaking a crowdfunding record that continues to this day. In March this year, during our second crowdfunding round, we raised £12 million and were completely oversubscribed and as such, we had to turn away investors that wanted to contribute. Roughly 10 per cent of Monzo has been crowdfunded, the rest has been raised through venture capital.

“I think the results of our crowdfunding efforts signal a shift in paradigm for the financial services industry, it shows that public wants to own and engage with their bank.
Tips on successfully crowdfunding a business

“I think the secret of our success, and a tip I would pass on to anyone thinking of crowd funding a venture, is to make sure you are offering a product or service that people actually want to use. That is critical for any crowdfunding pitch. Successful start–ups solve common problems, but it is surprising how many fledgling companies neglect this.

“The next piece of advice I’d give is to ensure that your offering is focused totally on the customer and that they are involved as much as possible in the development process.
“When creating the Monzo prepaid card for example, we went to great lengths to ensure that we received continuous feedback from users on each iteration to deliver an optimised customer experience.

“Community engagement is also very important to us. We have an online forum of 15,000 members where they can engage on a variety of topics, from their favourite cooking recipes to credit scores. Additionally, we also have an event at our office every month, open to every Monzo account holder, where they are encouraged to discuss their thoughts on what they would like to see next from their bank.“

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