App-only challenger bank Monzo is looking to move more customers to its forthcoming current account and away from its loss-making pre-paid card service after racking up a pre-tax annual loss of £6.7 million.
In a frank assessment of its priorities and financials, Monzo boss CEO Tom Blomfield says the company has recorded an average of five percent weekly growth in customer numbers and seven percent weekly growth in transaction volumes since January.
"If we continue to grow at this rate, we will hit somewhere between 500,000 and 800,000 accounts by the end of the year," he says. "To continue to offer the level of support we aim for, we will need to significantly expand our team; we’re looking to bring on around 40 new customer operations staff in the next six months."
The rapid growth has come at a cost for the startup bank, which saw losses balloon to £6.7 million for the year ended Febuary 2017, compared to £1.4 million in the comparable period.
"Having built direct connections into Mastercard and Faster Payments, our unit economics will improve dramatically once customers move to the current account," says Blomfield. "The prepaid scheme loses around £50 per active customer per year. Simply by moving to current accounts powered by our own technology, we plan to significantly reduce this amount."
He says the bank has about fifty current accounts live today among staff with a goal of rolling out to all exiting customers in late summer.
Other costs come from customer support and international ATM usage, an issue which dogged European neo-bank N26 in its formative stages, and accounts for 40% of Monzo's losses. Although not explicitly stated, the minority of users driving this cost can expect to see charges introduced for overseas ATM withdrawals in the not-too-distant future.
Blomfield says the bank has enough capital to run for another 12 months, but will likely need to return to the market for further funding into 2018.
In the interim, the search goes on for a revenue-generating model. To this end, the bank is exploring different ways of introducing a lending component to to its suite of services.
"We will focus on offering lending tools to to help people manage their day-to-day finances more effectively," says Blomfield. "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."