Wednesday 5 July 2017 2:42 pm

Revealed: Monzo’s annual report and the 6 things we learned about the digital challenger bank

Monzo has released its annual report, revealing how the fintech business is doing.

Here's what we learned…

1. It's u-turning on lending

Monzo told City A.M. last year that it would be concentrating solely on the current account, with no plans to expand into traditional banking products. Clearly, things have changed. It will now start “experimenting with lending functionality” to bring in revenue.

Here’ s what they had to say about the fresh plans

“Roughly speaking, we aim to be in the cheapest quarter of the market on price (adjusted for factors like risk, customer profile, and the type of lending), but we do not aim to be price leaders in all circumstances. Nor do we wish to set a single headline price and compete as part of "best-buy” tables. Instead, we will focus on offering lending tools to to help people manage their day-to-day finances more effectively. We want to give people immediate visibility and control of their money, rather than tempting them in with a low headline price and then recouping costs elsewhere."

"As a result, we will aim to run a number of quick, small-scale lending trials to better understand how people like to manage their money. When we’re confident these new product features work well for customers, we’ll roll them out more widely. You may start to see glimpses of new features or pricing that we’re trialling over the next few months!”

It still won’t offer Monzo mortgages or Monzo credit cards, however: “Instead, we want to be a platform or marketplace that gives people visibility and control of all of their money, whichever providers they use. The future of banking is data and identity.”

Tie-ups along the lines of the growing number among fintechs which have cropped up in recent months are being considered and Monzo will aim to roll out “a handful” within the next year. It’s also eyeing the potential of loyalty points.

“We are looking at early prototypes of these third party integrations today and some are already pretty magical.”

2. When users will get current accounts

By late summer, it hopes to offer them to existing customers – currently 50 staff are usng the account to ensure that it’s all in order for the wider launch. Though, it did say it trys to avoid “‘big bang’ launches, instead preferring to roll-out new features iteratively”.

3. It will have half a million accounts by the end of the year

The startup estimates that by the end of the year it will have between 500,000 and 800,000 account holders. That’s up from its current number – revealed in the accounts – of 240,000 and its current growth rate stands at five per cent per week. They spent £250m between them over the past year, a figure growing by seven per cent per week.

4. It’s hiring staff

Monzo will take on 40 staff to handle customer service – something it said it was willing to to “over-invest in the short-term to provide our customers with a world-class experience”. Based on full-time workers employed on minimum wage, that would cost at least £500,000 per year.

Staff costs more than tripled in the past year, according to the accounts, hitting just under £2m.

5. When it will make profit

Like many a startup, Monzo is not profitable and neither is it a priority (for this year at least). It has enough cash from investors to keep going for the next 12 months, but it will have to raise more in early 2018, or even sooner if it grows faster. This could include another round of crowdfunding.

Its pre-tax losses for the year to February came in at £7.9m, up from £1.7m a year earlier.

6. How it will cut costs

At the moment, Monzo’s pre-paid cards are costing it £50 per user. Monzo has admitted it’s a ploy for getting users to sign up before its full bank launch (current accounts) and to test things out with them.

Based on the figures provided, getting those additional customers signed up to an account instead of a card could save millions – the sooner the account launches, the better.

And 40 per cent of those costs come from “international ATM usage outside the UK or EU, with a small minority of our user-base driving the majority of this cost.”

Answer? Change that.

“As a result, we will explore ways to reduce this cost in collaboration with our community – it will not be a profit-making exercise. UK and EU ATM usage costs us much less, and we aim to keep this free. We still believe foreign exchange at point-of-sale (in shops, restaurants and online) can be provided to customers for free."