In many ways, Monzo - and, to a slightly lesser extent, Starling - have brilliantly marketed themselves to a younger audience as leaders in financial innovation. Because of this, they've grown fast. Monzo in particular recently announced a massive round of funding which suggests that they're gearing up to really take on the giants of the banking world here in the UK and beyond!
And yet as an archetypal target customer for Monzo, who was lured in by a funky coloured card and promises of a new way of banking, I’ve never really embraced it. Once I received my Golden ticket to become a Monzo customer it didn’t take me long to lose interest. In fact, after around a month of using Monzo as an account that helped me to budget my cash, I quickly retreated back to my old reliable Lloyds Bank account.
I’m not alone in this. Figures from 2017 show that, although over 1m UK banking customers switched their current accounts, few of them switched to challenger banks. It was actually Halifax who hoovered up more switchers than anyone.
So why is this? Why are younger banking customers like me so slow to adopt digital-only challengers as our main bank accounts?
After all, banks like Monzo and Starling have lots of customers, and they both provide excellent current accounts. The problem isn't that they're not liked - there's just something stopping many of their customers going all-in and switching to them as their main current account.
Which is strange, because their target audience is comfortable switching to new and unfamiliar technologies in almost every other aspect of life: from Tinder to taxis, ASOS to Airbnb, you’d be hard-pressed to find any industry in which a bold new challenger hasn’t used new technology to take a chunk of the market share among millennial (and younger) customers.
This is perhaps even more apparent in the case of bank branches; why go through the chore of visiting a bank branch when you can simply use an app? This has been a serious issue for major banks, as branch closures continue to increase. In fact, many argue that the traditional major retail banks are beginning to fall behind, as they fail to adapt to a changing industry.
One reason is the perception that challenger banks are less secure than the traditional big banks, who have the ballast of multi-billion-pound capital reserves. But there’s no real reason for this to be an issue. Both banks are FCA regulated and FSCS protected. If they went under one day, our savings and current accounts would be protected.
Perhaps it’s a lack of knowledge and confidence. After all, there are plenty of reports about millennials’ unprecedented lack of financial literacy. Maybe it’s a lack of confidence that makes us reluctant to change. Most of us don’t really choose our first bank, we just take out an account with whichever bank our parents use. And once you’re with them, you might as well stick with them. As long as they’ve got an app, decent customer support, and all the main features, what more do you really need?
And, ultimately, this is the crux of it: I don’t feel like switching my Lloyds Bank account to Monzo would give me enough benefits to be worth the hassle, especially when it involves my finances – a subject I deal with because I have to, rather than because it’s fun.
Yes, it’s handy as a budgeting tool, but it didn’t really transform my finances. It just made the point – as if I needed a reminder– that I was spending too much and not saving enough.
It also lets you spend on your card while abroad with no fees. This is undeniably a great feature, but I rarely go abroad more than twice a year, so I haven’t used it enough for this reason to grow familiar with it.
Monzo would say that they offer a more personalised banking experience, allowing you more control over your spending. But whilst Lloyds Bank’s banking app may not have the same ‘modern’ feel to it that Monzo does, it gives me what I need.
Through Lloyds Bank's app I can track my transactions and payments at all times, and I can check my account balance whenever I need to. If I want instant updates on what I’m spending, I can use Apple Pay. Lloyds Bank have also added new features to their banking app, including a location tracker to spot fraudulent transactions, and a system by which cheques can be cashed in using a mobile.
Most of these features are standard across the major banks.
Monzo’s other major benefits are less concrete, but still hugely valued by its customers: community and transparency. Monzo’s purpose is to fundamentally change the relationship between bank and consumer. For some people, this resonates. Others see finance as a chore – often a confusing one – and they’re content with a simple and secure banking experience. If Monzo want to draw these people to its community, an educational approach, designed to make people feel more empowered and confident in making financial decisions, might be a good approach.
This isn’t to say that I’m ‘anti-Monzo’. I like the idea of disrupting traditional retail banking. I think it has woken up the banking industry and incentivised the big banks to offer better digital experiences as standard.
Yet in order for Monzo to persuade me to leave behind Lloyds Bank and completely transfer across to this new form of banking, I feel the benefits need to be stronger and clearer.
They say we’re more likely to get divorced than change banks. Given that, I need Monzo to be more than a personalised bank designed for my phone.