Monzo is “absolutely not” going to be the next Wonga, its founder has said, amid speculation the digital bank was planning to move into the high-cost loan space.
Tom Blomfield, whose up-and-coming challenger bank this morning completed a landmark £20m crowdfunding round powered by its own customers, told City A.M. he was “categorically not working on a high-cost credit product at all”.
But, he added, helping “people with spiralling debt and poor credit scores” was still an area the company intended to move into. “How we do so, I don’t know yet”.
“Is Monzo launching a wonga competitor? Absolutely not,” he said.
The company was popping the champagne corks today as it celebrated raising £17.96m in less than three hours this morning via crowdfunding.
The digital bank, known for its coral-coloured cards and informal approach to customer relations, reached its overall crowdfunding target of £20m in the process, after two days’ fundraising among existing investors.
Only the final sprint to the finish line this morning, which the company claims saw £2.94m raised in one minute of frenzied buying, was open to new investors, finishing at around 12.45 this afternoon.
But the crowdfund, which City A.M. revealed exclusively earlier this year, has drawn criticism in recent weeks for allowing existing banking customers to take out a loan to participate.
The bank allowed customers to take out an overdraft of up to £1000 to buy shares which, because they are not openly traded, can not then be sold on to repay the loan, The Times reported last week.
Hitting back at the criticism, Blomfield claimed allegations of offering loans to buy shares were “just not true”.
“We have existing customers who have overdrafts, and only existing customers can buy shares. So the question is should we disable those overdrafts for all or some customers? Our answer was no we shouldn’t, that’s not appropriate,” he said.
"Overwhelmingly the response from both our customers and neutral parties was that this is a storm in a teacup. I really celebrate that we now have 35,000 new shareholders who can now share in the potential upsides of the business."
Blomfield added the company, which this year surpassed one million customers and gained the coveted Unicorn status in October after its value eclipsed $1bn (£790m), was still “not looking to IPO any time soon really”.
“There’s plenty of private capital around but we’re not going to be profitable for the immediate future,” he said.
But even so, Monzo is gaining around 100,000 customers a month, he revealed, and is on course to finish 2018 with 1.3m. By the end of next year, Blomfield added, the bank expects to boast “at least” 2.5m account holders.
“Each customer is creating more revenue than they drive in extra cost. At the start of the year each customer drove an extra £35 of losses, now each customer drives an extra £5 of gross margin,” he said.
On the fast-moving market of digital challenger banks Blomfield said he expected to see some market consolidation over the next year as smaller competitors snap at the heels of traditional high street banks.
“I think you’ll see one or two be snapped up by either big banks here or in Europe,” he said.
For Monzo and its smaller competitors, he added, “getting to scale is now the name of the game”.