Customers turn their backs on Monzo and Revolut as fears mount over profitability

London7766551

Customers are moving their money out of Monzo and Revolut over concerns the digital banks are still not managing to make a profit. 
Many were attracted by their high-tech apps and speedy sign up process and Monzo and Revolut now have around four million and 10 million global customers respectively. Despite their growing user bases, Revolut’s losses tripled to £106m in 2019 and Monzo’s more than doubled from £47m to £114m. 
There is no suggestion customers' cash is at risk. Deposits held by Monzo are covered by the Financial Services Compensation Scheme, while Revolut has a different way to guarantee savings are protected. However, customers are concerned the challenger banks do not have the staying power of the incumbent high street giants. 
Cathal Morrow, 54 from south London, decided to move his money out of Monzo after seeing its latest results. He chose another digital bank, Starling, “because its financial situation seemed far more secure”. 

“I really liked that Monzo was doing something a bit different and it was easy to set up an account. But when I read the annual report it made me nervous, so I switched,” Mr Morrow said.  Starling is much closer to making a profit. Its losses were £52m last year.  

Jordan Edwards, 27 from London, is also concerned about how safe his savings are with Monzo.  “The company is sleepwalking into trouble. The platform is great, but I’m concerned about its long-term existence if it doesn’t offer more than just savings, as they won’t make much money from that,” Mr Edwards said.

Revolut customers too have been voicing their concerns. Earlier on in the pandemic rumours circulated that the firm was at risk of going bust. Users took to Twitter to ask if their money was safe and whether they should move it elsewhere. Revolut was forced to issue a public statement, which said the rumours were “false information”. 

One customer, who asked to remain anonymous, said he moved his money from Revolut to another lender after finding it was not part of the FSCS. This lifeboat fund promises to reimburse customers for up to £85,000 should a financial firm go bust.

Revolut does not yet have a British banking license. Instead it safeguards customers’ funds by holding them in ring-fenced accounts with other lenders.

https://www.telegraph.co.uk/personal-banking/current-accounts/customers-turn-backs-monzo-revolut-fears-mount-profitability/?li_source=LI&li_medium=li-recommendation-widget

I found this very curious, it would seem if this article is true, the majority of people still do not trust digital banks, even if they are (in the case of Starling and Monzo) a bank!

If digital banks are to gain more trust, it seems to me they are going to need some kind of physical presence, a branch perhaps? It is all "in the head" of course, but people do not seem to have let go of the old fashioned way of banking completely, they trust banks more if they can "see" them.

adamp87

Is it in the head? The reasoning in the article is the bank isn’t making profit so they are cautious about putting money into the bank..

London7766551

adamp87 said:

Is it in the head? The reasoning in the article is the bank isn’t making profit so they are cautious about putting money into the bank..

In a sense that a bank with a branch is safer, when in reality it doesn't matter if a bank has a branch or not in regards to how much money it is making. In a wider sense, the customer was with Monzo, this is protected, so indeed there is no risk as such.

adamp87

London7766551 said:

adamp87 said:

Is it in the head? The reasoning in the article is the bank isn’t making profit so they are cautious about putting money into the bank..

In a sense that a bank with a branch is safer, when in reality it doesn't matter if a bank has a branch or not in regards to how much money it is making. In a wider sense, the customer was with Monzo, this is protected, so indeed there is no risk as such.

But that’s conjecture. The articles not saying it’s because they don’t have a physical presence.

Consumers read about banks struggles and after 2008 move banks. Whilst yes there money may he protected it’s still not idea I suppose.

But the real issue with Monzo is people aren’t using it like a main stream bank, and Monzo aren’t offering the credit (the real money maker) that more established banks offer.

born_again

Don't get it. Their money is FSCS protected, so will get it back in around a week if they do go under. Odds on another bank would step in and take them over. Nice large userbase and good software that people like, compared to most bricks & mortar banks.
Do they think that you get your money back quicker having to queue up outside a bank?

London7766551

adamp87 said:

London7766551 said:

adamp87 said:

Is it in the head? The reasoning in the article is the bank isn’t making profit so they are cautious about putting money into the bank..

In a sense that a bank with a branch is safer, when in reality it doesn't matter if a bank has a branch or not in regards to how much money it is making. In a wider sense, the customer was with Monzo, this is protected, so indeed there is no risk as such.

But that’s conjecture. The articles not saying it’s because they don’t have a physical presence.

Consumers read about banks struggles and after 2008 move banks. Whilst yes there money may he protected it’s still not idea I suppose.

But the real issue with Monzo is people aren’t using it like a main stream bank, and Monzo aren’t offering the credit (the real money maker) that more established banks offer.

Yes, I can see that. Hence "it seems to me"

We had the infamous bank run on Northern Rock, but with a digital bank, you would not even be able to see it happening. And in turn would not result in a bank run from a visual aspect. 

I had no idea they did not offer credit until today, that is a bit rubbish for a bank!

Shakin_Steve

They do loans and overdrafts, you can apply on the app.

garmeg

There is a Facebook group called 'Monzo stole our money' with about 4,500 members. That may explain any distrust of Monzo I guess?

colsten

London7766551 said:

In a sense that a bank with a branch is safer......

That illusion went out of the window in 2007. May be too long ago for younger people.....

London7766551

colsten said:

London7766551 said:

In a sense that a bank with a branch is safer......

That illusion went out of the window in 2007. May be too long ago for younger people.....

Certainly not for me, I referenced it in my post at 7:30pm.

I still believe people trust a bank more if it has a physical presence. Regardless of the logic.

TheMightySwordfish

They need to pay people to keep money in their account. Charging people to have a Card and a bit of Interest at best will only work short term. The real money is made on Loans/Mortgages and they can't even think of that if people aren't leaving their money in the accounts.

I'm quite happy to switch for bribe. Actually got to point of switching my main account for an account with a fee as it paid me more than I was getting. People need to learn that Banks aren't worth their business if they don't earn from the Bank. Especially in times like these.