Monzo, the UK-based fintech, continues to add customers both in the UK and now the US, but profits are yet to arrive as the challenger bank invests in staff and increased marketing spend.

The mobile-only bank hit ‘unicorn’ status last October, when its valuation cleared $1bn; as of last month, Monzo doubled its valuation in a funding round led by the Silicon Valley incubator Y Combinator.

Speaking to CNBC at the time, Anu Hariharan, a partner at YC’s Continuity Fund, said community was at the core of the firm’s decision to invest. He praised “the traction with which they hit 2 million users in the UK, with engagement metrics that almost look like a social network”.

Built with and for a community of users, in 2018 the bank’s head of marketing and community, Tristan Thomas explained to WARC how his department was as much about communicating externally as it was about bringing the community’s ideas into the process. The feedback loop of the Monzo community is fundamental to the bank’s development. “They hold us to account and tell us when we’re going wrong and that’s great,” Thomas said.  

Its dual hallmarks are product functions that big banks’ apps don’t offer and a radical transparency that other banks simply can’t rival. Taken together, its brand is a combo of that functional and moral benefit, alongside its distinctive coral cards.

Though it remains a privately-owned startup, the company issues not only a frank financial report but also product roadmaps, strategic objectives, and year-by-year diversity reporting.

In an interview with the Financial Times this week, however, CEO Tom Blomfield spoke about the flip-side of these new ideas, how the idea of making money – turning a profit – somehow became associated with traditional banks’ modus operandi of ripping off consumers, and that if Monzo were making money, they must be doing the same. Times and attitudes are changing.

Though the company is ultimately looking to become sustainable – having introduced features like an overdraft and removed the costly in-app top-up feature – losses are still rising. Last year, the company was down £47.2m and Blomfield said losses in the year ahead would continue to mount.

Investment is necessary, and for the time being investors appear comfortable with the company’s need to grow. At the level of the current account, Monzo has drastically reduced the cost of onboarding new customers. Other signs are positive too: total deposits into current accounts grew six-fold year on year, while the number of customers tripled.

“Structurally,” Blomfield said in June, “we have a really strong position… over time we’re going to build a very successful business.” It is doing this by setting aside money to beef up staff by a factor of three. It will also spend £20m on marketing. 

This is a significant development from last year, when Monzo said it would continue to push the word-of-mouth strategy that had promoted it so far and when it also held something of an anti-agency stance. Speaking to Marketing Week in March, following the launch of its first campaign, Thomas explained that they had employed an (undisclosed) agency because of scale, Monzo's youth in the paid media space, and the need for external expertise.

“We have a preference for working in-house but you can’t bring everything in-house immediately.” The bank is learning and continues to grow. But it remains sceptical of becoming overly reliant on advertising. “I think it’s quite an unhealthy way to build a business,” Thomas added.

Sourced from CNBC, WARC, Monzo, Financial Times, Marketing Week