The first six months of 2023 have brought a welcome bout of profitability to the UK’s digital banks. Monzo, a leading digital bank, recently released its annual report, providing valuable insights into its performance. In this article, we delve into five key takeaways from the report.
1. Continued Growth and Profitability
Despite officially reporting a loss of £116.3m for the year up to March 2023, Monzo’s CEO, TS Anil, and Chair of the Board of Directors, Gary Hoffman, emphasized the bank’s trajectory of strong customer and revenue growth. Monzo has reached profitability, marking a significant milestone in its eight-year journey, and aims to fuel its ambitions both at home and abroad.
2. Increased Marketing Investments
Monzo’s marketing spend has seen a substantial jump, with a 500 percent increase from £3.6m to £21.7m. This includes a brand refresh and the use of digital platforms like TikTok to attract more customers. The bank’s ‘Give £5, Get £5’ campaign and customer referrals have been instrumental in its growth.
3. Focus on Monzo Business
While Monzo has seen an overall increase in customers, the report highlights a greater focus on Monzo Business. With 7.5 million customers, Monzo witnessed a 1.7 million jump in customer numbers compared to the previous year. The growth rate of new customers remains strong, though word-of-mouth referrals are declining.
4. Building Trust and Increased Usage
Monzo’s customers are becoming more trusting, as reflected in the growth of deposits and card spending. Card spending increased by 38 percent to £33.6bn, and customer deposits jumped 34 percent to £6bn. Monzo’s strong balance sheet management and investment in high-quality liquid assets contribute to this trust.
5. Lending Expansion and Credit Risk Management
Monzo has significantly increased its lending products, including overdrafts, unsecured personal loans, and Monzo Flex. Total lending grew by 194 percent to £759.7m, resulting in an increase in credit loss expenses. Monzo remains cautious about credit risk management and has adjusted its models to account for higher expectations of loss.
Monzo’s annual report reveals a path to profitability, driven by strong growth, increased marketing investments, a focus on the business segment, building customer trust, and a careful approach to lending and credit risk management. As Monzo continues on its growth trajectory, it aims to empower customers in managing their money better.