Oct 30, 2024

. We have known the company’s CEO Tom Blomfield for seven years as some of us had worked with him on his previous company GoCardless. Four years ago he told us that he had a vision for a new bank in the UK that would become irresistible to consumers looking for contemporary services. Tom spoke about simplicity, transparency, fairness, customer service, and community. Since then, he and his co-founders have moved mountains to be in a position to execute on this vision, including gaining a banking license, raising money from top-tier investors, hiring a world-class team, building a beloved brand, and winning and delighting over one million customers. Tom and his team clearly exhibit qualities that we love in great founders: long-term vision, strong product instincts, and a relentless focus on listening to customers and serving their needs. Our investment in Monzo is based on the simple belief that consumers are increasingly choosing best-in-class software to run their lives. A quick look at the ratings for the Top 10 installed apps in any country tells us that consumers choose products with beautiful design, low-latency, and high customer delight. This is a requisite for scaling and serving tens of millions, as consumers have come to expect it. And yet, many incumbent financial services companies have failed to deliver on this expectation. Consumer surveys of the top high street banks in the UK reveal high customer dissatisfaction and low net promoter scores. The market they address is very large: the top four high street banks in the UK control 75% of the current accounts and are collectively worth over $300B, and for scope, more than 50% of UK adults take out consumer credit products (beyond revolvers on credit cards). This environment has created opportunities for challenger banks like Monzo to turn customer love into rapid customer growth with high NPS scores and best-in-class user retention and engagement. Monzo has achieved this by putting consumers front-and-center as they build the company. For example, Monzo’s community forums are very active, allowing the company to have a dialogue with its customers and actively solicit feedback. By having its own banking license and a tech stack built in-house, Monzo’s engineering teams can respond to customer needs, innovate on products quickly, and operate with a lower cost-base. This is how Monzo is able to continue to delight its users. A Changing Landscape If you look around the world, a few fundamental changes have already started to take place that makes us excited about our partnership with Monzo. First, mobile is narrowing the gateway to the customer. According to AppAnnie, the average mobile user has 60–90 apps on his/her phone, but only 30 of them are launched each month and just nine are launched each day. This means there is a limited window to gain a user’s attention. The average Monzo user opens the app every day. As the front door to customers continues to narrow, we believe a change will take place in financial services, where the owners of best-in-class software will become the distribution channels for best-in-class products. In many ways, we are already seeing this in mobile-first markets like China, where apps like Alipay and WeChat/WeBank have become some of the largest consumer financial services platforms in the world by first aggregating user scale and attention and then developing as distribution channels for loan, savings, investment, and insurance products. Mobile-centric, Monzo is built for the way consumers bank today. As the rest of the world continues to spend more time on mobile, we posit that consumer financial ecosystems in the West may start to look more like what they do in the East. Today Monzo is creating some of its own products in areas like overdrafts and loans, while simultaneously leveraging partners to distribute other products, e.g., cross-border wire transfers from Transferwise. We are excited to watch Monzo leverage its market leadership among digital-only banks to potentially become a financial supermarket. Second, a mobile world is changing the paradigm of growth among the next generation of financial services companies. Whereas traditional banks grew up by building branches, sending direct mail, and engaging in telesales, next-generation banking companies can grow virally. Payments, for example, is inherently social. Think of how often we split bills with friends. Monzo is capitalizing on these social hooks in order to grow its customer base. Global fintech leaders such as Wechat (China), PayTM (India), and Venmo (USA) have leveraged social P2P actions to rewrite the rulebook for how quickly companies can grow. It’s still early days for Monzo, but we are excited that they are growing virally with almost no marketing spend. Finally, we believe this is a “perfect storm” moment for companies like Monzo to build a digital-only bank given broader technological developments and secular and regulatory trends. First, in addition to the unprecedented opportunity created by ubiquitous smartphone adoption, companies like Jumio and Onfido have introduced scalable KYC-as-a-service, replacing what used to be a higher friction manual process. Second, the continued adoption of digital payments is reducing the need for ATMs and bank branches. People who’ve grown accustomed to basic online banking services are now seeking savings, credit and investment products with greater frequency. Finally, companies like Plaid in the US and government-led initiatives like Open Banking in the UK are also democratizing bank data, which has the potential to power better financial services experiences. The evolution of Open Banking combined with London’s history as a center for global financial services innovation puts Monzo in the right place at the right time to build an iconic financial services brand. With our investment, Monzo joins a GC family of fintech innovators that includes companies like Stripe, Gusto, and Oscar and follows our investments in a number of European companies including Brainly, Contentful, Deliveroo, and Shift Technologies. We are thrilled to be partnering with Tom and his incredible team at Monzo, and can’t wait to see what comes next. — Adam Valkin, Addie Lerner, Alex Tran & the GC Team