Really interesting to see the re-rise of challenger banks. IIRC Simple was one of the first and did OK never hit the valuation that these new ones are getting.
My hunch is that these are doing comparatively better outside the US because basic banking elsewhere is relatively worse than here. In my experience with at least Chase and Capital One the "big banks" have invested pretty heavily in their UI/UX and I haven't had any issues getting CX questions answered when I need to.
Possibly with the exception of business. The property management company my girlfriend runs fields literally thousands of checks a month and sends hundreds a week.
This is the norm in the United States when actual money is involved.
48 hours!? There's no excuse for a transfer not being subsecond in 2019. Introducing a 48 hours delay to knowing if someone has actually paid you or not when they said they have... adds a ton of pain to running a business.
I regularly transact with US companies in the music & media world and their first payment choice is often a cheque.
>My hunch is that these are doing comparatively better outside the US because basic banking elsewhere is relatively worse than here. In my experience with at least Chase and Capital One the "big banks" have invested pretty heavily in their UI/UX and I haven't had any issues getting CX questions answered when I need to.
Would completely disagree with this. I suspect, in the UK, they're doing better because regulators have recently become much friendlier towards challengers. The UK has also generally been pretty good with encouraging new technologies - faster payments, CASS, open banking, cheque imaging etc have all been launched with varying degrees of success.
It's well known that banking technology is generally worse in the US -- you only have to look at the roll-out of EMV and contactless to see how slow-moving things have generally been there. As far as I know there's no direct equivalent to the UK's Faster Payments scheme, either [1]. Do any of your banks even support 3-D Secure?
Companies like Monzo are able to differentiate on _much_ more than just UX and customer support. The tech stack has been designed from the ground up, so payments and notifications are (at least to a human observer!) instant. You have novel services like Monzo.me that allow external people to pay into your current account ("checking account") via debit card instantly.
My understanding was that basic banking in the US lags most of Europe; contactless infrastructure is poor, mobile payments non-standardised, charges for basic accounts & general fees are all more common, more barriers to current (checking?) account switching (this is standardised in the UK by BACs & the current account switch service).
It is a better environment for the challengers outside the US because there is better infrastructure & standardisation which allows them to compete with bigger incumbents.
That's a pretty big contrast from Europe... I've never seen a transaction using magstripe personally, I don't think magstripe was available even in the 90s, that sounds much older than VHS tapes.
Really? I've never seen anyone using one, I mean they were still on the card in the early 2000s as a legacy part of the card but no place I know would have accepted that at the time.
I just moved from the USA to the UK. It was shocking how much better the consumer banking system is here.
With 10 seconds of typing on my phone, I set up my standing rent payment to my landlord (which would have been too much money to use Chase's QuickPay at home). I gave my gym and utilities my account number and sort code and they can (with my permission, which I can revoke any time without talking to them) bill me regularly. I recorded a little video of me holding my passport and a scan of it, and that was sufficient ID for them to give me a new account. For everything under £30, I just tap my wallet on the little terminal. For everything over, they bring a terminal to me and I type my PIN. I never have to give up my card to anyone for any reason.
It's a pretty low bar to get over, but Monzo is definitely the best bank I've ever had. The US consumer banking system sucks by comparison.
Canada's consumer banking is a mess compared to the UK. There are no free and instant transfers between accounts, checks are still used and take even longer to clear than they do in the US, and you can't get visa debit cards that will go through the regular visa credit network, which means that (in 2012 at least) it was impossible for me to use my Canadian bank card to make purchases online. Even the USA gets that right.
Interac transfers aren't proper bank transfers. They go through a payment processor (Interac) and the recipient has to act on an email. They also weren't free when I lived in Canada, but cost around $1-$2. In the UK and other European countries, making a bank transfer is much more straightforward.
The major problem with an Interac transfer, apart from the inconvenience, is that you can't easily prove that anyone received the money, since you're sending the money to an email address (!) rather than a bank account.
>Could be, but I haven't seen a cheque in years.
Checks are still commonly used in Canada (e.g. for paying rent).
>You can definitely get VISA debit cards in Canada.
Debit cards are processed through Interac. Most debit cards also allow processing through the visa credit network for foreign transactions, but not necessarily for domestic online transactions. For example, my TD Canada Trust card was not accepted online by Ikea because it could only be processed domestically through Interac or the visa debit network, neither of which were accepted by any significant number of online merchants at the time. I called TD. Their suggestion was just to "get a credit card" (which wasn't really possible for someone newly-arrived in Canada). That may have changed since 2012, but it's still pretty shockingly bad. In the US and UK, you can use your debit card anywhere you can use a credit card.
If you don't believe me, here's a quote from the "visa debit" Wikipedia article:
> For the dual-network cards, in-person transactions within Canada are processed on the Interac network, but international transactions, as well as online and phone orders through Canadian retailers, are processed through the Visa network.[1][2] (However, Canadian retailers must specifically allow for Visa Debit transactions, even if they already accept Visa credit cards.)[5] "Virtual Visa Debit" works similarly; customers use their existing Interac debit cards for in-person transactions (and Interac Online) in Canada, but are also provided with a secondary "virtual" Visa card (i.e. card number, expiry, and CVV2) which can be used for online and phone transactions (but not point-of-sale, in Canada or internationally).
Only in Canada do you actually have to understand any of this crap to figure out why your card doesn't work.
Just to distinguish Monzo from all other banks: "I recorded a little video of me holding my passport and a scan of it, and that was sufficient ID for them to give me a new account." Everything else is standard for all banks in the UK.
I've worked for a major UK bank on the branch side and I also interviewed at Monzo a couple of months back on the platform side - their verification process satisfies KYC requirements but it feels so modern in comparison to existing banks.
Back at my previous bank they're still taking copies of ID and sending them off to a central location to be re-digitised.
The UK, where Monzo is from, has (from what I can glean as someone who has not lived in the US) a much better banking experience than the US. Cheques are rarely used by most people because bank transfers are instant and free,d there is a functional Direct Debit system for automated variable-amount billing, most bank accounts are free with the every-day services (payments, bank transfers, ATM withdrawals, cash deposits) also being free, EMV “Chip and PIN” payments have been the default for well over a decade, contactless is widely deployed, etc.
The difference from the US is probably that there are less institutional hurdles to establishing a new bank.
Monzo, Revolut and N26 (backed by Peter Thiel) are all splashing down around the same time in the U.S. to vie for the Challenger/Neo-Bank crown, where they will compete with:
As a customer, a bank having problems can be good for you.
If they go under, the government protects all deposits, and there is a good chance you won't have to pay off any loans, or if you do, that the interest will be frozen for years till the bank is wound up.
What would you do with an API that can't already be done? I understand the hesitancy of giving a third party such as Plaid your bank credentials, however an exposed API to your bank seems to be a rather niche need.
As an example, Monzo was quite outspoken about their API at first, but it has since taken a backseat, presumably because they didn't see a huge need for it.
I use Plaid, but I'm not paying them (and not planning to) so I don't have much trust that they won't pull the rug out from me.
Maybe it's niche, but the number of programmers in the world continues to grow and if there was one that would be a powerful differentiator among that audience.
The way I see the banking api industry evolving is as follows:
Currently banks have been implementing API’s because it has been mandated by regulatory bodies. From their perspectives, the APIs are a money sink, and even worse, could make their customers less reliant on their infrastructure - increasing their chances of losing customers.
I see it differently, and predict that the landscape will change dramatically. Open banking APIs are going to enable a whole host of products and services - allowing customers to verify their income painlessly, or manage their investments and credit cards with minimal effort.
As the ecosystem of products around open banking grows, banks will begin to see the quality of their APIs as a strength, and a way to differentiate themselves from competitors. Customers could one day choose their bank based on how well it integrates with their smart phone, or favourite online market place, etc
Monzo are already capitalising on the opportunity with some very smart moves. They are using https://truelayer.com (a banking infrastructure company) to display their customers credit card’s balance and transactions within the Monzo app. Eventually users will be able to pay off their credit cards from within the Monzo app. Just imagine the possibilities!
In short, there are many exciting opportunities, and early adopters could win big.
>As an example, Monzo was quite outspoken about their API at first, but it has since taken a backseat, presumably because they didn't see a huge need for it.
You're not wrong.. but it's still very much functional and has received some recent additions (receipt API). I do wish they'd do more with it, though. I suspect the problem is that most customers just don't care.
The internal API is fairly trivial to begin using, if necessary.
> I suspect the problem is that most customers just don't care.
IMO the reason is they (perfectly rationally) realised after spending several million building an authorised bank that APIs are a pure downside scenario for them, i.e. intermediation risk. Why spend so much money to stand up a de novo bank and let everyone else capture the value? 99% of the value is top of stack. This is why no market in the world has provided 1st party banking APIs for retail products. It's taken regulators to do so in Europe and the results of that (predictably) fell short of what everybody had hoped. No criticism of Monzo for this. Based on their incentives this was the rational course of action.
You have a point, and I agree OB has been disappointing. I think there's a middle ground where you offer something that still provides value for personal use, attracts potential patnerships (see Flux) but doesn't give away the "keys to the kingdom" so others can profit off of your work without you, as a bank, benefitting from building the platform in the first place.
I suspect there are is a decent number of 'techies' and early adopters who found Monzo's API, despite its limitations, attractive to them. I've used it to save myself a bunch of time with expenses and it's nice to know that, if I wanted to, I could use the internal API too.
In its current state, Monzo could easily expand the existing personal API (which deliberately doesn't allow you to scale - only whitelisted user IDs can use your OAuth client) whilst minimising intermediation risk, provided that they didn't add the same endpoints to AISP API.
N26 have some big troubles in germany. The BaFin (german abbr. for Federal Financial Supervisory Authority) is taking a closer look into N26 after several reports for "money disappearing" and having insufficient customer support.
I think it’s highly likely Monzo will be one of the winners. The leadership is strong, and customers absolutely love their product, as quantitatively measurable by their crowdfunding.
Great investment for YC, who also take credit for shaping the way Monzo has been led.
My only annoyance about Monzo is that I’ve been unable to invest so far. The only company that can stop Monzo now is Monzo.
I wonder who the initial sponsorship bank is. I imagine any very large bank is going to see the kinds of differentiators that Monzo is offering (whatever they will be) as things they should just clone, rather than grow a partnership with a competitor over, but I really have no idea how this industry works. Anyone have insight from the peanut gallery?
As someone with a Monzo account, but whose main accounts are with Barclays and Nationwide, I find the hype around the "challenger banks" in the UK a bit unexpected. I'm not really sure I understand what they are offering that is so revolutionary. I still think it's great they exist as competition is overdue in the UK banking sector, and I hope they do well.
I find Monzo works well for what I use it for, which is tracking my daily small item spending (getting lunch, buying a coffee etc), while the Barclays and Natwest apps work well for the "grown-up" banking. Between the latter two I have 4 bank accounts, two credit cards and two mortgages, and the apps (combined with Faster Payment's awesome transfer time) make it ridiculously easy to manage my finances.
Monzo app is definitely very nicely done, and there are some neat features, but for my day-to-day banking I have absolutely no issue getting everything done with the Barclays and Nationwide apps. Both could do with a bit of UX work and decluttering, but they are perfectly fine.
Are the rest of the main banks just really awful compared with Barclays and Nationwide?
I have a fancy colored debit card now, which is cool.
Tend to use my HSBC for direct debits and bills, and Monzo for daily life/luxury/fun items.
It just seems like the legacy banks are awful rather than Monzo is breaking boundaries. I have a Chinese bank card and I get opt-in text notifications for my spending and have done for years.
Most UK banks offer apps, Monzo is not doing anything particularly new. Their success has been in convincing investors that the competition is "ossified" whilst dropping tons of their money and failing to actually gather deposits.
You can buy £400bn of deposits with Lloyds for £40bn (and get paid 5%/year for the pleasure). Or you can pay £1bn for a loss-making company with £100m in deposits...it is pretty simple.
Monzo offers push notifications within 5 seconds of card payments. Customers love that feature. Traditional banks don't offer it, probably because none of their batch computer systems can do anything in 5 seconds. That has been the status quo for 5+ years, and I don't see it changing.
That is nothing special though, just most UK banks are using decades old technology. Five years ago I was living in country where my bank would send me an SMS as soon as I authorised a transaction on the chip&pin machine.
I like Monzo for what they do, but I don't really see why they are considered so valuable. The real value in consumer banking is offering credit, and that's where it starts to get complicated.
Here in the UK Amex do that too: instant push notifications from the Amex app or from Google Pay, even if you used the physical card.
Monzo did offer the novel feature of convenient, temporary, self service card disabling / enabling (useful if you lose it then find it again) but loads of traditional banks have now copied it.
...why do I care about push notifications? By "customers love that feature" you mean, you like that feature. Most people aren't interested in having an app at all but the ones that are just want to be able to look at their balance, make payments, and cash cheques.
If I want to see if I have made a payment, I just open the app...which takes 10 seconds instead of a 5 second push notification.
* I get an independent confirmation that money has actually left my account (eg we’ve all shopped on websites when the payment pages crash and you don’t know if something has gone through or not)
* it’s comforting knowing that if for some reason someone else was illegally using your card, you’d be getting instant push notifications about it.
From October 2018 to April 2019, what exactly changed with Monzo? If you were to objectively take the 2X-ing of valuation, you'd assume their revenues and profits (if any) doubled in that time frame.
Hard to believe doubling of real KPIs (like GAAP revenues) in 6 months, I hope YC isn't contributing to the unreasonable doubling of valuation without actual KPI changes.
The timing of this funding round is also the biggest surprise for me. Their last round was in November last year and they raised a significant amount of money. It's genuinely taken me aback that five months later they are raising funding again.
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[ 3.3 ms ] story [ 150 ms ] threadMy hunch is that these are doing comparatively better outside the US because basic banking elsewhere is relatively worse than here. In my experience with at least Chase and Capital One the "big banks" have invested pretty heavily in their UI/UX and I haven't had any issues getting CX questions answered when I need to.
Interbank transfers are free & fast enough (24-48 hours). Apps like Venmo give them a nice enough UI.
This is the norm in the United States when actual money is involved.
I regularly transact with US companies in the music & media world and their first payment choice is often a cheque.
Would completely disagree with this. I suspect, in the UK, they're doing better because regulators have recently become much friendlier towards challengers. The UK has also generally been pretty good with encouraging new technologies - faster payments, CASS, open banking, cheque imaging etc have all been launched with varying degrees of success.
It's well known that banking technology is generally worse in the US -- you only have to look at the roll-out of EMV and contactless to see how slow-moving things have generally been there. As far as I know there's no direct equivalent to the UK's Faster Payments scheme, either [1]. Do any of your banks even support 3-D Secure?
Companies like Monzo are able to differentiate on _much_ more than just UX and customer support. The tech stack has been designed from the ground up, so payments and notifications are (at least to a human observer!) instant. You have novel services like Monzo.me that allow external people to pay into your current account ("checking account") via debit card instantly.
[1] - No, same-day ACH doesn't count.
It is a better environment for the challengers outside the US because there is better infrastructure & standardisation which allows them to compete with bigger incumbents.
Checks, magstripe transactions and signatures on their card receipts..
With 10 seconds of typing on my phone, I set up my standing rent payment to my landlord (which would have been too much money to use Chase's QuickPay at home). I gave my gym and utilities my account number and sort code and they can (with my permission, which I can revoke any time without talking to them) bill me regularly. I recorded a little video of me holding my passport and a scan of it, and that was sufficient ID for them to give me a new account. For everything under £30, I just tap my wallet on the little terminal. For everything over, they bring a terminal to me and I type my PIN. I never have to give up my card to anyone for any reason.
It's a pretty low bar to get over, but Monzo is definitely the best bank I've ever had. The US consumer banking system sucks by comparison.
Most banks offer free interac transfers. All you need is your recipients email and they are instantaneous (if the receiver sets to auto-accept).
-Checks are still used
Could be, but I haven't seen a cheque in years.
-You can't get visa debit cards that will go through the regular visa credit network
You can definitely get VISA debit cards in Canada.
Interac transfers aren't proper bank transfers. They go through a payment processor (Interac) and the recipient has to act on an email. They also weren't free when I lived in Canada, but cost around $1-$2. In the UK and other European countries, making a bank transfer is much more straightforward.
The major problem with an Interac transfer, apart from the inconvenience, is that you can't easily prove that anyone received the money, since you're sending the money to an email address (!) rather than a bank account.
>Could be, but I haven't seen a cheque in years.
Checks are still commonly used in Canada (e.g. for paying rent).
>You can definitely get VISA debit cards in Canada.
Debit cards are processed through Interac. Most debit cards also allow processing through the visa credit network for foreign transactions, but not necessarily for domestic online transactions. For example, my TD Canada Trust card was not accepted online by Ikea because it could only be processed domestically through Interac or the visa debit network, neither of which were accepted by any significant number of online merchants at the time. I called TD. Their suggestion was just to "get a credit card" (which wasn't really possible for someone newly-arrived in Canada). That may have changed since 2012, but it's still pretty shockingly bad. In the US and UK, you can use your debit card anywhere you can use a credit card.
If you don't believe me, here's a quote from the "visa debit" Wikipedia article:
> For the dual-network cards, in-person transactions within Canada are processed on the Interac network, but international transactions, as well as online and phone orders through Canadian retailers, are processed through the Visa network.[1][2] (However, Canadian retailers must specifically allow for Visa Debit transactions, even if they already accept Visa credit cards.)[5] "Virtual Visa Debit" works similarly; customers use their existing Interac debit cards for in-person transactions (and Interac Online) in Canada, but are also provided with a secondary "virtual" Visa card (i.e. card number, expiry, and CVV2) which can be used for online and phone transactions (but not point-of-sale, in Canada or internationally).
Only in Canada do you actually have to understand any of this crap to figure out why your card doesn't work.
Back at my previous bank they're still taking copies of ID and sending them off to a central location to be re-digitised.
The difference from the US is probably that there are less institutional hurdles to establishing a new bank.
That's.. the opposite of true - it's not even wrong. Banking in the US is stuck in the '70's, compared to Europe.
-Simple/BBVA (https://www.simple.com/)
-Varo (https://www.varomoney.com/)
-Qapital (https://www.qapital.com/)
-Aspiration (https://www.aspiration.com/)
-Empower (https://empower.me/)
-MoneyLion (https://www.moneylion.com/)
-Acorns (Spend) (https://www.acorns.com/spend/)
-Chime (https://www.chimebank.com)
-Zero (https://zero.app/)
-Point (https://trypointbank.com/)
-Finn/Chase (https://www.chase.com/personal/finnbank)
-Marcus/Goldman Sachs (https://www.marcus.com/)
-Greenhouse/Wells Fargo (https://www.wellsfargo.com/greenhouse/)
-GoBank/Green Dot (https://www.gobank.com/)
-Square (Cash) (https://cash.app/)
-PayPal
-Apple (https://www.apple.com/apple-card/)
-(Maybe Amazon soon)?
(edit: links)
- Starling Bank - https://www.starlingbank.com/
- B / Clydesdale & Yorkshire Bank - https://www.youandb.co.uk/
- Monese - https://monese.com/
- Metro Bank - https://www.metrobankonline.co.uk/
Loads more too - https://en.wikipedia.org/wiki/Challenger_bank
If they go under, the government protects all deposits, and there is a good chance you won't have to pay off any loans, or if you do, that the interest will be frozen for years till the bank is wound up.
Especially without requiring account payments of ~$3,000 per month OR ~3% of your deposits (yes this is what they are charging)
NorthBay Credit union in Santa Rosa, wants $3,000 per month and a litany of access rights to your financials that no other bank asks for.
Other CUs are seeking 3% of the total deposits in your account asa "service fee"
Fuck that.
As an example, Monzo was quite outspoken about their API at first, but it has since taken a backseat, presumably because they didn't see a huge need for it.
Maybe it's niche, but the number of programmers in the world continues to grow and if there was one that would be a powerful differentiator among that audience.
Currently banks have been implementing API’s because it has been mandated by regulatory bodies. From their perspectives, the APIs are a money sink, and even worse, could make their customers less reliant on their infrastructure - increasing their chances of losing customers.
I see it differently, and predict that the landscape will change dramatically. Open banking APIs are going to enable a whole host of products and services - allowing customers to verify their income painlessly, or manage their investments and credit cards with minimal effort.
As the ecosystem of products around open banking grows, banks will begin to see the quality of their APIs as a strength, and a way to differentiate themselves from competitors. Customers could one day choose their bank based on how well it integrates with their smart phone, or favourite online market place, etc
Monzo are already capitalising on the opportunity with some very smart moves. They are using https://truelayer.com (a banking infrastructure company) to display their customers credit card’s balance and transactions within the Monzo app. Eventually users will be able to pay off their credit cards from within the Monzo app. Just imagine the possibilities!
In short, there are many exciting opportunities, and early adopters could win big.
You're not wrong.. but it's still very much functional and has received some recent additions (receipt API). I do wish they'd do more with it, though. I suspect the problem is that most customers just don't care.
The internal API is fairly trivial to begin using, if necessary.
IMO the reason is they (perfectly rationally) realised after spending several million building an authorised bank that APIs are a pure downside scenario for them, i.e. intermediation risk. Why spend so much money to stand up a de novo bank and let everyone else capture the value? 99% of the value is top of stack. This is why no market in the world has provided 1st party banking APIs for retail products. It's taken regulators to do so in Europe and the results of that (predictably) fell short of what everybody had hoped. No criticism of Monzo for this. Based on their incentives this was the rational course of action.
I suspect there are is a decent number of 'techies' and early adopters who found Monzo's API, despite its limitations, attractive to them. I've used it to save myself a bunch of time with expenses and it's nice to know that, if I wanted to, I could use the internal API too.
In its current state, Monzo could easily expand the existing personal API (which deliberately doesn't allow you to scale - only whitelisted user IDs can use your OAuth client) whilst minimising intermediation risk, provided that they didn't add the same endpoints to AISP API.
Build products that don't break every 5 minutes because they don't depend on sticky tape and bubblegum holding them together (screen scraping)
For example, use all unspent money at the end of each month to buy shares.
https://teller.io
We're hiring too. https://news.ycombinator.com/item?id=19547472
Congrats to Monzo on the round!
Great investment for YC, who also take credit for shaping the way Monzo has been led.
My only annoyance about Monzo is that I’ve been unable to invest so far. The only company that can stop Monzo now is Monzo.
Best thing is I could sign up online without ever having to go to a branch. I think they are the only business checking account that allows that.
Are established banks so incredibly ossified they can’t keep up with that?
I find Monzo works well for what I use it for, which is tracking my daily small item spending (getting lunch, buying a coffee etc), while the Barclays and Natwest apps work well for the "grown-up" banking. Between the latter two I have 4 bank accounts, two credit cards and two mortgages, and the apps (combined with Faster Payment's awesome transfer time) make it ridiculously easy to manage my finances.
Monzo app is definitely very nicely done, and there are some neat features, but for my day-to-day banking I have absolutely no issue getting everything done with the Barclays and Nationwide apps. Both could do with a bit of UX work and decluttering, but they are perfectly fine.
Are the rest of the main banks just really awful compared with Barclays and Nationwide?
I have a fancy colored debit card now, which is cool.
Tend to use my HSBC for direct debits and bills, and Monzo for daily life/luxury/fun items.
It just seems like the legacy banks are awful rather than Monzo is breaking boundaries. I have a Chinese bank card and I get opt-in text notifications for my spending and have done for years.
You can buy £400bn of deposits with Lloyds for £40bn (and get paid 5%/year for the pleasure). Or you can pay £1bn for a loss-making company with £100m in deposits...it is pretty simple.
I like Monzo for what they do, but I don't really see why they are considered so valuable. The real value in consumer banking is offering credit, and that's where it starts to get complicated.
Monzo did offer the novel feature of convenient, temporary, self service card disabling / enabling (useful if you lose it then find it again) but loads of traditional banks have now copied it.
If I want to see if I have made a payment, I just open the app...which takes 10 seconds instead of a 5 second push notification.
* I get an independent confirmation that money has actually left my account (eg we’ve all shopped on websites when the payment pages crash and you don’t know if something has gone through or not)
* it’s comforting knowing that if for some reason someone else was illegally using your card, you’d be getting instant push notifications about it.
The experience of banking with Monzo is easily 10x the other six major UK banks I’ve used extensively.
Hard to believe doubling of real KPIs (like GAAP revenues) in 6 months, I hope YC isn't contributing to the unreasonable doubling of valuation without actual KPI changes.