Is Monzo Losing Its Edge? The Decline in Current Account Switching Battles
Monzo, the app-based bank, is facing a decrease in switching customers since its peak in 2019. Recent data shows that Monzo lost a net 7,635 switchers in the first three months of 2023. This decline in customers may be attributed to other banks offering cash incentives to switchers.
In 2019, Monzo attracted over 63,000 switching customers from other banks, surpassing even the big banks during that period. However, by the end of last year, Monzo had a net loss of 2,079 switching customers, marking the first time the neo-bank experienced negative figures. The most recent data reveals an even steeper drop with a net loss of 7,635 switchers in the first quarter of 2023.
This decline in switching customers is noticeable from the quarterly data, which indicates that Monzo’s net switching customers reached their peak in 2019. Known for its coral pink debit cards, Monzo was one of the pioneering app-based challenger banks and gained popularity for its convenient account opening process through its app.
Experts have differing opinions on the decrease in switching customers. Some consider it a natural progression, while others suggest that Monzo may need to offer cash incentives like its larger rivals to entice switchers back. Andrew Hagger, founder of MoneyComms, states that Monzo has lost its appeal based on official Current Account Switching Service figures. He believes this is partially due to many other banks offering £150 to £200 incentives. However, whether this aligns with Monzo’s current business model or incurs too much expense remains a question.
It’s worth noting that banks have been increasingly generous with cash incentives to attract new customers. In 2022, Nationwide Building Society acquired almost 147,000 switchers, setting a record for the highest number of switchers in a quarter period. During this time, Nationwide was offering £200 to new joiners.
Monzo defends its decision not to offer cash incentives for switching customers, asserting that it forms an insignificant part of the overall picture. The bank highlights its consistent organic growth with over half a million new customers each quarter and its position as the 7th largest bank in the UK, serving nearly 8 million customers.
James Blower, founder of Savings Guru, views the decrease in Monzo’s switching customers as a natural progression. He explains that Monzo has achieved remarkable growth without resorting to switching incentives and suggests that the bank may be reaching its natural peak for customers. Blower also notes that high street competitors have implemented similar features offered by Monzo and have started providing incentives of up to £200 to switch.
Monzo’s financial results from June 2023 reveal an annual net loss of £116.3 million, slightly lower than the £119 million net loss reported in 2022. Blower emphasizes that Monzo’s primary challenge is profitability. While the bank has established a successful current account, it has struggled to lend out the money generated from customer balances, which is where most banks make their profits. Blower finds it perplexing that Monzo has yet to find a way to monetize this aspect.
According to Andrew Hagger, Starling Bank, another challenger bank, may follow a similar trajectory to Monzo, experiencing a decline in switching customers without offering cash incentives as part of its customer acquisition model.
While the decline in switching customers may not significantly impact Monzo’s 7.5 million account base, the bank’s main challenge lies in turning a profit. It must find a way to leverage the balances generated by its current account to ensure long-term financial success.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
