By the end of 2015, people in London's coffee shops and pubs started brandishing a new form of status symbol: a distinctive, hot coral, "Mondo" prepaid card. Silicon Roundabout tech bros gave out "golden ticket" codes to their friends to skip the queue and sign up for the card and its attached device. In 2017 Mondo changed its name to Monzo and became a fully licensed bank, changing its prepaid cards to standard debit cards connected to an existing account.
Monzo's upended a market reputation for conservatism in just over five years. It did something more than just creating a brand that is considered the gold standard for any new brand or service: it created a strong identity and forged a connection with customers. Monzo has managed to excite people about the banking. So, as dithered by incumbents, the challenger company did what every startup is trying to do: it scaled. Today, it has more than four million clients.
Around this time , the company ballooned from a small team squatting in early investor Passion Capital 's offices to an enterprise in the heart of the city with 1,500 employees. In June 2019, it became the second most successful fintech in the UK, worth £ 2bn, behind OakNorth alone (both were later overshadowed by the February 2020 $5.5bn (£4.5bn) valuation of Revolut).
"We changed the game," says 11: FS head of research at financial consultancy Sarah Kocianski. "Technology was available, and they were able to work for cheap. People were ready, everyone had a phone in their pocket, they were ready for the regulators. Monzo just made the biggest splash, partly because it was the loudest and partly because of the pace of attracting customers.
Monzo is now facing a big challenge. The startup bank is far from profitable, still relying on external funding, and its company accounts show that it has burned by cash as it expands, losing around £47.2 m in 2018, up from £ 30.5 m the previous year.
It faced a decrease of nearly 40% in its value in May 2020 as it tried to raise about £70-£80 m to survive the coronavirus pandemic, and soon after co-founder Tom Blomfield stepped down as CEO, eventually taking the position of president. But there are still great ambitions to it. Monzo's strategy is to grow from plucky competitor to major bank, expand into the massive US market – and eventually make a profit.
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Some big competition is standing in its way: UK fintechs like Starling and Revolut, as well as conventional banks with much greater cash reserves (as of the end of 2019, neobanks had 19.6 million customers – Lloyds Banking Group alone had 30 million customers).
It's going up against Chase Bank, Bank of America, Citibank and Wells Fargo in the US. So that is if it continues to stay on track in recent memory through the worst pandemic, when the Covid-19 epidemic plunges the global economy into recession so causes companies to collapse.
Itting on a rainy afternoon in March in one of Monzo 's glass offices, a few days before London is locked down, 34-year-old Tom Blomfield (right) leans conspiratorially forward. "By my money, I am terrible," he says. "I've got lots and lots of stories – bailiffs at one point gave me a notice because I didn't pay my council tax."
He 'd signed up for a service that changed the information automatically when you travel home, he says, but that didn't work. "I just wanted to get away from the faff. As I haven't adjusted my phone bill for fifteen years, I overpay all this stuff with a huge sum on home broadband, car insurance,.
He now says his rating is good, testing his score on the Monzo app. This would be – according to the Daily Telegraph, Blomfield, based on its investments in Monzo, was worth around £80 m in 2018. Yet his experience shows the ethos behind his business: to solve the most irritating banking problems, in a way open to everyone.
Blomfield may still look like a clean-cut professor of law at Oxford University but he's already a serial entrepreneur. When he was 21, he created his first venture,VK.com, Boso.com, an eBay for students, but didn't make much money (the startup was taken over by his more established co-founders, who managed to get financing, and eventually sold the business to a Canadian firm).
His next entrepreneurial venture, GoCardless payments service, struggled to raise seed capital when it was first released in 2011 (since then, it has raised $122.3 million in investment). He joined entrepreneur Anne Boden in 2014 to launch the first mobile-only bank in the UK, providing current accounts via an app and other products such as loans and mortgages.
The enterprise was later renamed Starling Bank and was initially called Bank Possible. Frequent conflicts have been well known between Boden and Blomfield, who held the position of chief technology officer at Starling. Both Monzo and Starling would not comment on the factors behind the split.
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