UK digital-only bank Monzo is launching in the US - but getting American customers to sign on may be a challenge
- UK neobank Monzo announced plans to launch in the US on Thursday.
- Monzo is conducting an in-person sign-up campaign where it will survey interested customers on what frustrates them about banking and features they would be looking for in a new bank, Monzo's CEO Tom Blomfield told Business Insider.
- Monzo became a unicorn with its most recent investment round in October 2018.
- For more stories like this, visit Business Insider's homepage.
The number of digital banks like Chime and Varo are climbing in the US.
The banks aren't encumbered by expensive physical branches and can conduct business more cheaply through mobile phones.
But that's exactly how one of the largest European digital-only or "neobanks" will begin its expansion in the US. UK-based Monzo announced plans to launch in the US on Thursday, which includes an in-person sign-up campaign across the country to be held in coworking spaces and other large event venues.
Monzo has made big strides in the UK, where it has grown to 2 million users and is adding 200,000 users a month. The bank became a unicorn with its most recent investment round in 2018, following fellow UK competitor Revolut.
However, Tom Blomfield, Monzo's CEO, told Business Insider the success the bank enjoyed in the UK doesn't guarantee it will translate in the US.
"We don't want to make that mistake of just assuming what works in the UK will work in the US," Blomfield said. "We want to come here and really understand customer behavior and needs to tailor the product experience."
- Read more: The digital-only challenger banks explainer
As part of the sign-up campaign, the bank will survey interested customers on what frustrates them about banking now and what features they would be looking for in a new bank. Blomfield said the goal is to use the sessions to understand what Monzo should offer in the US. In addition to the in-person gatherings, potential new customers will also be able to join a waitlist online.
The grassroots approach to launching in the US falls in line with how Monzo got started in the UK, Blomfield said. Under its former name Mondo, the bank set a crowdfunding record in 2016 by selling $1 million in equity in only 96 seconds.
While the bank is looking for customer feedback to shape the product, Blomfield said there are certain features Monzo's US offering will definitely have. There will be no minimum balance fees, low overdraft fees, and no fees for using the debit card internationally.
Eventually, as is the case with many fintechs in the wealth management space, Blomfield wants Monzo to expand the financial products it offers to customers. However, instead of developing them all internally, Blomfield said the bank would prefer to facilitate relationships with other financial firms.
"We are aiming for Monzo to be a kind of a financial hub," Blomfield said. "We want to be a kind of platform or marketplace to offer the best products and services out there rather than relying on cross selling our own stuff."
Monzo may have a hard time convincing US customers to switch. According to a 2018 cg42 study, only 9% of customers said they were most likely to switch to an online-only bank. The study posits that this might be because of a lack of options in the US compared to other countries.
That may be changing as companies like Peter Thiel-backed N26, which made a name for itself in Germany, and Revolut are working to expand to the US. Chime, a US-based challenger bank, is now valued at $1.5 billion. The San Francisco-based bank added over 10.000 users in one day after a Wells Fargo outage. Continued frustration with traditional banks could give neobanks like Monzo the opportunity to gain US market cap, a fear traditional banks are acutely aware of.
See also: A quarter of UK consumers will have a neobank account within five years
Non-US based banks will have to grapple with US customers appetite for earn-as-you-spend banking products, which are very rare in Europe because of an EU cap on interchange fees. Blomfield said doesn't have plans for any points or cash-back programs at the moment, but says that Monzo is "open-minded about it."
As for what will set Monzo apart in what is quickly becoming a crowded field of digital-only banking options in the US, Blomfield pointed to the ease of use of the entire experience as opposed to a single selling point.
"We have not one silver bullet, but two dozen lead bullets," Blomfield said.