Has Monzo lost its mojo? How the app-based bank has begun to lose the current account switching battle

In 2019, Monzo, the app-based bank, welcomed more than 63,000 customers who switched from other banks, according to an analysis of Current Account Switching Service data for This is Money.

In the last three months of 2019, it captured 20,843 switching customers, more than any of the big banks in that period.

But fast forward to the end of last year, Monzo had lost 2,079 net switching customers, the first time the neobank went negative.

And in the first three months of 2023, Monzo suffered an even steeper decline from a network of 7,635 exchangers, according to the most recent data showing which banks people leave and join using the official exchange service.

The numbers, published four times a year, show that Monzo’s net exchange customers peaked in 2019.

Best known for its coral-pink debit cards, Monzo was one of the first in a series of challenging new app-based banks.

It proved popular with customers for its easy-to-open checking accounts through its app.

Some experts think the drop in customer switching is a natural progression, while others believe the bank will need to offer cash bonuses like big rivals if it wants switchers back.

Andrew Hagger, founder of MoneyComms, says: “If you use the official CASS figures as a yardstick, Monzo seems to have lost its appeal.”

Hagger believes that “this is likely partly due to so many players in the checking account market offering golden greetings of £150 to £200.”

“If you want to compete with the big banks, then Monzo would have to offer an equally attractive incentive – it depends on whether that suits Monzo’s current business model or is too high a cost to bear, particularly with people jumping more and more from one free offer to another. other.’

It is true that banks have been offering cash bribes to new customers who have been more generous and quicker than ever.

In 2022, the Nationwide Building Society gobbled up nearly 147,000 switchers in just three months, the highest ever recorded in a quarter by CASS. For much of that time he was paying £200 to new members.

A Monzo spokesperson said these change numbers represent a very small part of the big picture.

They said: “We are currently adding over half a million customers per quarter and are the seventh largest bank in the UK, with almost 8 million customers.”

However, Monzo stands by its decision not to offer cash bribes to clients to open an account.

The spokesperson added: “Unlike many others, we do not offer cash incentives for those who switch from CASS, as our growth is strong and has always been largely organic, and most customers hear about us through friends and family”.

James Blower, founder of Savings Guru, believes that the decline in the number of customers switching from Monzo is a natural progression.

He argues: ‘Monzo has grown incredibly strong and is probably reaching its natural peak for customers. It has grown from zero to 7.5 million checking account customers without paying switching incentives.

‘That is a very strong endorsement of your proposal and product. So I would expect such a high growth trajectory to level off at some point.

Blower adds: “We’ve also seen high street competitors fight back with many copy features that Monzo offers (as well as free transactions abroad, budget and jackpot features are now offered by other banks) and also incentives of up to £ 200 being offered to exchange.’

Unlike other banks, Monzo does not give cash kickbacks to switching customers as its growth has been largely organic.

Starling Bank could be the next challenger bank to follow a trajectory similar to Monzo’s slump in customer turnover, Hagger believes.

He says: “While not posting any net losses yet, Starling Bank is also showing a drop in numbers and also doesn’t offer cash kickbacks as part of its customer acquisition model.”

Monzo’s most recent financial results published in June 2023 showed a £116.3m net loss for the year, although this was slightly lower than the £119m net loss Monzo reported in 2022.

Blower says: ‘Monzo’s biggest challenge is making money. I don’t think he should worry about losing a few thousand accounts when he has 7.5 million of them; he will do it now.

‘The most fundamental challenge you have is making a profit. Although you’ve built a terrific checking account, you’ve had trouble lending out the money this creates in balances and this is where most banks get their money.

“It’s baffling that I haven’t figured out a way to monetize this yet, and I think that’s a much bigger problem.”