Despite increasing competition from digital banks, Monzo’s co-founder and CEO doesn’t believe that big banks are looking to change the way they do business. In fact, he says they’re actually designed to stop digital transformations.
“The banks really focus very hard on their existing set of financial products,” said Tom Blomfield, co-founder and CEO of Monzo, explaining that those include “balance sheet products” such as mortgages, loans and credit cards. But he points out that customers are more concerned over when they will be paid and what they can afford in terms of daily expenses.
Blomfield added that there is a “disconnect” between large lenders and their customers, making it feel like “a dying industry.”
Founded in 2015, London-based Monzo has gone from a startup offering prepaid debit cards to a regulated bank with more than 3.5 million users. Earlier this year it was reported that the company was in talks with Japan’s SoftBank for financial assistance in its plans to expand into the U.S. Monzo is reportedly seeking around £100 million in new funding. It raised £113 million in June from the U.S. fund Y Combinator Continuity, which set Monzo’s valuation at more than £2 billion.
Other digital banks have also seen strong growth in both the U.S. and Europe. German mobile banking company N26 recently announced that after five months of operation in the U.S., it has gained 250,000 customers. It also revealed last month it now has 5 million customers total—a 40 percent boost since last summer. It is Berlin’s most valuable FinTech startup, valued at $3.5 billion.
And U.S.-based Chime raised $500 million in a Series E funding round in December, sending its valuation to $5.8 billion. Its account base is at 6.5 million—up from 1 million the year before—and attracts about 150,000 direct deposit users a month.
While this success is putting pressure on large traditional banks, that doesn’t mean that they’re ready to change the way they do business.
“A lot of the systems inside the bank — particularly risk and compliance functions — are there to stop things changing. Because if things change it creates risk. And so they’re like these antibodies that go around hunting out change and trying to kill it,” explained Blomfield.