Monzo is a neobank that is known to offer multiple financial products to its consumers and also to its business partners. It is an English bank and it is one of the first apps in the UK market based on this system and founded in 2015 by a group of entrepreneurs. They were earlier Workers and employees in one of the English Bank ok which is also established in the financial sector. Let us know How Does Monzo Make Money?
They do not have any physical franchise of their own, instead, they manage all their products to the mobile app and on the system. The business model of Monjo is based on different income factors.
In this article, we are going to talk about the financial streams of Monjo and how they generate wealth through their different products and services despite having any physical branch.
Working of Monzo
We already mentioned that Monjo is a new bank and they make their best through selling financial products and services. Currently, they have a 39% user base in banking services.
You can set up your account and verify them within minutes and users also get the option to get a MasterCard directly in a few days. They also host current account options for the users so that users can enable the option to set budgets, split expenses and create their saving pots.
Other essential features they offer to their users are:
- Setting different expenses according to the bill and budget.
- They have features to split your expenses between your friends and also with your family members.
- If you want to set up a joint account with another person then they also provide this feature
- They also provide different purchasing plans according to your expenses
Money making streams of Monzo
Monzo app and setting up consumer accounts free of charge. The basic plan of this app allows the user to grow faster and new users are also joining at a rapid rate.
Monzo’s basic model is based on different income streams which provides them with monthly revenue from different business accounts.
Through business accounts
For private consumers, the setup and usage of accounts are free of charge but Monzo Charges monthly subscription fees through business accounts in exchange for using their app Services.
Their business plans are only available to 1000 businesses. Monzo is in the testing phase and wants to establish a smooth process for companies to conduct their businesses and expenses efficiently through their app.
Through Interchange fees
Monzo charges small fees whenever a user makes a transaction through their MasterCard account. MasterCard and Monzo have a partnership under which they have to share the revenue generated through the interchange fees.
Monzo offers different financial products and Services which are under the master card transaction and it provides a medium of the transaction between the user and the Company.
Overdrafts are the additional fees which every customer pays when they have a negative balance in their account. They are short-term funds which are offered based on interest to every user to manage their negative balance.
Currently, they charge a rate of £0.5 a day under overdraft fees for any negative balance account. In 2019, the British financial conduct authority banned the daily overdraft fees charging and instead of it, they imposed the annual interest rate on every negative account.
It also depends on the consumer’s credit for how much per cent of the interest they are going to report on. Currently, Monzo charges up to 39% of overdraft fees on their users.
Customers also have the option to earn up to 1.5 % in annual interest per year on their credit scores. Monzo has collaborations with other lender companies which provides different opportunities to Monzo’s users.
Similar to other accounts they also use the saving amount of other users’ accounts as deposits to lend money from Other companies. Through this system, they can charge on interest collected through these loans.
Monzo Also allows users to borrow money from their partner banks. They capped the upper limit of the loan at £15,000 while they applied interest on their loan up to 20%.
Similar to overdraft fees, interest rates on users depend on their credit score and the amount they borrowed in the form of a loan. They provide loans for different utilities such as for home improvement, car purchases and other expenses. They have a very lenient process to get loans and also provide other benefits to their users.
Through energy partnership
Manzo has partnerships with electricity providers OVO energy and Octopus energy which encourage their user base to sign up for a new account in Monzo.
The agreement between these companies is not disclosed yet but it is clear that it receives a small amount in the referral form for sending new customers to their energy partners. They partnered together in 2019 and after that, they are making good money through this partnership.
- Monzo is an English bank and it is one of the first apps in the UK market based on this system and founded in 2015 by a group of entrepreneurs.
- They generate money by providing personal and business beneficial subscriptions with other features. They also take a share of regular interchange fees and charge interest on any bank loan or overdraft.
- They also have partnerships with energy companies OVO and Octopus energy. They have an agreement between them.
- Why is Monzo successful?
Monzo is successful because they attract customers through its app and which gives users a real experience and tracks their expenses. This also makes them more special than others.
- Does Monzo take our money?
Opening and using an account for normal work is completely free on Monzo but if you have any overdraft and also when you withdraw more than £200 in a month, then they charge some fees.
- What are the drawbacks to Monzo?
- They set a daily withdrawal limit for every user.
- For the usage of apps, you require a stable internet.
- They charge a fee of £1 for Depositing your cash at any local point.
- If you are only 16-17 years old, then you can only deposit up to £1,000 in your account every 6 months.