Will 2020 Prove to be the End of Monzo?

For a long time, it was considered the brightest unicorn of the UK fintech startup scene. Before the pandemic, sporting a pink Monzo card, as London city slickers and fintech aficionados alike did, was a form of social status signalling.

Since its beginnings in 2015, the pink coral card has become a common sight in the UK with Monzo reaching four million users in March 2020. With a US expansion in its mitts, it seemed that Monzo would make the leap from cult neobank unicorn to global player. Yet when the pandemic loomed, it dashed every individual and companies’ hopes and dreams with Monzo paying a heavy price too.

It started very quickly with Monzo shuttering its Las Vegas customer support office, salary cuts and furloughs in April. It continued with a recent funding round closing at 40% less than its previous value and enigmatic founder Tom Blomfield stepping down as CEO in May.

In particular, this move to step down at a time of crisis implicitly communicates a message of weakness. Moreover, Monzo has lost one of its literal faces aside from the coral-coloured card. Whilst he will remain as president, Monzo has forfeited its recognizable media presence. Previous interviews have shown Tom Blomfield as being the young and energetic face of an up and coming startup. Now, we are left with a face that is relatively unknown. 

Moreover, as 2020 has progressed and culminated into a year not only marked by a viral pandemic but also a structurally racist one, Monzo’s response has been tepid.

They initially showed some leadership by promising to establish privilege guidance meetings and offer guidance to other companies (see below).

However, this fresh approach in the fintech industry, a landscape that was slow to respond to the outcry after the murder of George Floyd, was quickly undermined. 

With Monzo having to lay off up to 50 employees due to the economic crisis that the pandemic has incurred, it emerged that the employment prospects of its very own head of diversity and inclusion was in jeopardy. This gives the impression that its previous proclamations to undermine structural racism were purely for show and that it is not doing enough to battle discrimination behind the scenes away from the public proclamations the fintech bank posts on its Twitter page. 

This seems like such a shame for a company that has prized diversity and inclusion in the past. Previously the digital bank has published a diversity and inclusion report and also vowed to make the language they use at an institutional level as inclusive as possible.

For a company that appeals to the politically switched-on millennial generation, this misstep during one of the most important moments in the civil rights movement in recent memory serves to undermine this inclusive identity that they have made such an effort to create. 

Furthermore, with lockdown being a time when traditional banks were physically inaccessible, branchless banks should have been ensuring their customers of their utility. However, some banking with Monzo at this time have arguably been penalized for going branchless. 

This Guardian article details how one of its readers had his account frozen with his furloughed wages and savings in it. Such grievances have led to a 3000-member Facebook group entitled “Monzo stole our money” to be created where people aired their complaints such as having accounts with child benefit money being frozen leaving them out in the cold in an insecure time. 

It is very true that the vast majority of Monzo’s over 4 million customers did not experience such problems. However, accessing funds during any time particularly during a pandemic is a basic requirement of a financial institution. These kinds of missteps at such a critical time suggest that Monzo and perhaps the wider digital neo-bank industry is not ready to be true challengers that they so proclaim themselves to be. 

As detailed previously, the upcoming years will prove to be a test for fintech in economic terms. However, as with all crises, it also represents a reckoning point where a company’s capacity is tested. Failures in access to financial funds for customers and also adequate responses to civil rights issues are fundamental requirements of any company operating in the 21st century. 

If Monzo can't get this right as soon as possible it won’t be the pandemic that dashes its challenger dreams but the company itself. And losing the only app bank that stands a chance in competing with its high street counterparts in the UK would mean that the industry would be losing a valuable competitor. The next few years will be tinged by an economic crisis whose middle name is coronavirus. It is only after this period when it will be revealed as to if this is a momentary wobble or the first signs of structural collapse.