Monzo's move into lending should help mount a more substantial challenge to its established peers:
While this represents the neobank's first full foray into the consumer credit market, it's worth noting Monzo has offered overdrafts since last year, charging customers £0.50 per day when overdrawn by £20 or more.
Monzo is offering both short- and long-term loans. Qualifying account holders can borrow a maximum of £15,000 for as long as 60 months, or borrow smaller sums starting at £200 for 90 days. For loans of up to £7,500 , the neobank is charging a maximum of 24%, while customers taking larger loans of between £7,500 and £15,000 could be charged as little as 3.7%.about the idea of launching credit products targeting the much-maligned payday segment.
Moving into customer lending is vital for Monzo given it's struggled to make money in recent years, despite acquiring millions of customers. The neobank's revenueMonzo's had 1.6 million customers in its fiscal 2019, meaning its revenue equates to a paltry £5.7 per customer.
While Monzo has acquired millions of customers, the majority don't use it as their primary bank account. Monzo itself classifies customers who deposit £1,000 ascustomers — and only 30% fall into that category. This suggests that while offering loans may help the neobank make money, it still has significant work to do to ensure its customers deposit large sums into their Monzo accounts, because otherwise its ability to lend will be severely restricted.
Monzo's move into lending also suggests the neobank is somewhat cautious about its marketplace approach. In the past, the neobank said its ambition was to build a financial marketplace where customers can assemble a suite of products from a range of providers. And it has done this to an extent by striking upagreements with third parties to offer consumers interest-paying savings accounts.
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