UK challenger bank Monzo is now officially making money on each customer account, confirming to Computer Business Review that every active customer now nets it £2.
The news highlights rapid efficiency improvements made by the bank, which has slashed the cost to run each account from -£65 in September 2017, to -£15 in June 2018, to +£2 now; ahead of analyst expectations.
Of that £15 it cost to run an account 12 months ago, approximately £10 of these costs were for customer support. The shift showcases ongoing efforts to drive these down through a combination of efficiencies of scale and automation efforts.
Monzo Account Cost: “We Hit +£2”
In response to questions from Computer Business Review, a spokesperson for the digital bank said: “Our customer contribution is now positive. In November last year we reached a positive contribution margin and by year-end we hit plus £2″, adding: “This means that every active customer who uses Monzo makes us more revenue than the variable costs for us to run their account.”
A graphic from Monzo’s 2018 annual report. Today’s news shows the ongoing improvements in cost reduction.
Kebbie Sebastian Managing Director of financial technology consulting firm Penser told Computer Business Review: ‘Most digital banks provide a better digital banking experience than traditional banks and we see the user base slowly shifting up beyond Millennials to older clients.”
He added: “As banks such as Monzo start to add lending services, we expect their positive contribution margins to steadily increase in the years ahead.”
Monzo is currently adding over 200,000 customers every month. While the bank is still loss-making (its annual report is expected soon with more details) cutting its cost of account so significantly and beginning to earn money from overdrafts is a notable step forward as it continues to scale up.
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News Follows Series F Round
The news comes the same week that Monzo saw its valuation climb to over $2 billion after it secured £133 million in a series F funding round.
This recent funding round has been led by US-based investor firm Y Combinator, which has previously backed rapidly growing online technology companies such as Airbnb, Reddit, GitLab, and file hosting platform Dropbox.
Founded in 2015 Monzo – which has built its own banking stack – has rapidly grown from a small UK challenger bank to a multi-billion pound company aiming to tackle the American market.
As the bank offers a digital-only service, it has no bank branch infrastructure to maintain. It has stated that the recently acquired funds will be used to expand its business in the UK and help it push into the American market.
CEO of Monzo Tom Blomfield commented in a release: “It’s so exciting when amazing investors back our mission to transform banking and make money work for everyone. With more than 2 million customers we’ve come a long way since we started but there’s still a lot more to be done – by listening to our community we’ll keep working hard to deliver the products our customers need to give them better control of their finances.”
Scaling Up: Monzo’s Infrastructure
Monzo, which built its own back-end, has scaled up using the open source Apache Cassandra as its transactional database, with its application code written in Go. It has a Kubernetes-based microservices architecture, and uses Apache Kafka for its asynchronous message queue, with AWS hosting most of its infrastructure and Google BigQuery providing Business Intelligence.
The bank uses AWS CloudTrail which provides API call history to enable security analysis, resource change tracking. It also uses Envoy Proxy, an open source tool first developed at Lyft, as the tool powering its service mesh.
