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Superficially, I don’t think there is a huge cause for concern. They’ll be in daily contact with the BoE/PRA and I’d hope there aren’t many with > £85,000 sitting in their rainy day pot in any tier 2/3 bank. I also think it’s worth considering that we’re experiencing an absolute economic tsunami, and many VCs and investors will be using the current market dislocation as an opportunity to drive greater value in a hot market.

I think the cost cutting is prudent however, they have struggled with profitability, both practically and culturally, and the down round along with market conditions might be the wake up call the business needs. Revolut’s access to $500m is not a unconditional committent, and will likely be contingent on the business hitting key mile stones, which of course can easily be missed. Just something to consider. I’d also bear in mind the reputation the bank has for sloppy compliance and the cost of fines regulators can and do impose


I do agree that the progress on product development is disappointingly slow, and in lieu of the expected innovation and deployment of new features at pace, acquisition of complementary start ups such as goHenry, notwithstanding the seeming lack dry powder at their disposal, or deeper partnerships with the likes of Freetrade could mitigate some of the lag. I’ve always maintained (without any qualification) that a partnership with the likes of Monzo feels like an absolute no brainer with their 4m+ users but I can imagine the chat around economics sharing is always a touchy subject given that everyone is chasing profitability and 5% of 0 is
well, you get my point. Even a link up between Freetrade and goHenry makes sense, a junior investment ISA powered by the :freetrade: platform has legs.

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I don’t think Monzo are back to where they were 15 months ago, but I think having to raise now during Covid-19 has been a massively negative thing for the business. I do think their business model, unit economics, failed products and opportunity all contributed to this recent valuation alongside Covid-19. You can’t say the same about Revolut if they wanted to raise now. It’s actually very different for them.

I don’t know what you’re seeing with Revolut that makes them immune.

I’m not trying to tear down Monzo by what I say here. I am an investor and think they have a good product, but in terms of valuing companies, I think there was lots of reasons for the lower valuation beyond Covid-19.

My confidence in Revolut over Monzo comes down to three things: Revenue, growth and opportunity. Revolut are riding waves and going from strength to strength. I think it’s hard to deny that, while it’s hard to say Monzo is doing well recently. They fired 165 members of staff, furlough lots more, premium accounts failed twice, they’re only in two markets and haven’t released much recently.

Revenue

Monzo has said it could be a few years until it gets to profitability. Revolut are aiming for it this year with more staff than Monzo. Monzo have also had to fire 165 people, furlough tons of staff. This doesn’t make me confident as an investor.

Whether you want to break down customers into different segments based on how they use either account, Revolut seems to be doing incredible well unit economics wise, and still hasn’t launched its own lending service and is only just launching banking services, while Monzo has had these for a while. Revolut has also cracked the premium account market, which is highly profitable while Monzo failed twice. Premium accounts have been listed as part of both their business plans. As an investor, it’s pretty negative that they’ve failed twice on this.

Growth

Revolut are in over 30 countries and growing nearly 1 million customers a month. Monzo is growing around 70,000 customers a month based on this thread. I think that speaks volumes for investors when it comes to valuations and confidence.

Revolut blitzscaled and were first movers into new markets. They have an expansion playbook while monzo does not. They have really established them self in lots of countries without any other fintech competition. Any new entrants has to win customers away from Revolut or compete with them for legacy banking customers. There won’t really be anything other fintechs can offer customers in markets Revolut beat them into. It’s actually the opposite, Revolut has more to offer than other fintechs.

When analysing the two business, I saw lots of opportunity for Revolut, but Monzo are only in the UK and have started in the US. It also remains to be seen if Monzo will go after lots of customers now, or spend 2 years getting the US banking license and then try grow. In the meantime, Chime, Revolut and N26 are growing as quickly as they can in the US.

I wouldn’t say Monzo had stellar growth either. Revolut, Chime, Nubank and maybe N26 have all been growing way faster. Monzo are not in that top tier of growing fintechs by user numbers, and certainly aren’t at the moment.

Opportunity.

Revolut have a lot more revenue streams. Trading, crypto, commodities, insurances, premium accounts, junior accounts and they are constantly releasing new features. For instance, if Monzo had a trading platform, they’d be benefiting from the huge increase in trading during Covid-19 and could sell that to investors during Covid-19. The likes of Freetrade and Revolut are benefitting from that part of Covid-19, but not Monzo.

Monzo and Revolut both spoke about building financial control centers for your life, but it seems like Monzo was sort of paying lip service to that, while Revolut is building it.

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So I take a slightly different view in that I take comfort from this in that they are willing and able to recognise where they need to shave costs, especially as they are some way off from hitting profitability. Having a big headcount doesn’t equate to having a rock solid business, and I think the justification for cutting the US support function makes sense.

I think this is really what it comes down to. I had a sense from general discussion and limited interaction with some of the Monzo team that they want to do it all themselves where possible, whereas Revolut are much happier to partner with third parties to bolt on and into their own stack and infrastructure. The former is great if you can actually deliver, but if you can’t you run the very real risk of being left behind, and I think this is what’s happened in terms of rev. generation. Tom alluded to an internal culture problem in that revenue and profit had been perceived as a bit grubby, which is SO interesting, because once you have that mindset, as a business your eye is somewhat off the prize. As much as I have a distaste for Revolut’s management and business culture, I do think the founders’ IB background has contributed to the business’ primary focus on economics. Monzo, heads up: you can delight your customers and make money, cf. Apple - everyone’s favourite business to comp.

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One thing I haven’t seen mentioned yet is the fact that VC investors are hugely tightening the purse strings all over. To some extent, the discount will be down to the VCs being much more risk averse. Looked at that way, getting some money albeit on not as good terms has to be better than getting no money at all (at least one person I know works for a company where potential VC investment has gone from ‘healthy’ to ‘cut off’).

Assuming Monzo make it through the short to medium term, I don’t think their long-term prospects have changed any. They’ll rebound if they survive, and I like to think they’ll find a way to do so - though I’ll admit that Starling have performed better in reaction to Covid (and Revolut? They were incredibly lucky with the timing of their raise).

Interesting times.

ETA as nearly missed this:

I think they’re working to fix that. If you look at their recent staff changes, there seems to be a clear shift in emphasis. Tech-focused people have been leaving and been replaced by banking-focused people. For example, their new COO is ex-Amex.

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The comparison regarding the number of countries needs a more nuanced view.

Monzo is a fully licensed and regulated bank in the UK and has been for a while. Revolut has only just got their banking license in Lithuania and it does not have a fully banking license in the UK.

Managing banking regulations and compliance in markets like the UK is extremely challenging and Revolut have actively backed away from taking this approach in the UK market.

There will be pros and cons of each approach and clearly each company has a different business model but we need to recognise that Monzo will have developed the capabilities and experience of being a fully licensed bank in a large complex market like the UK which Revolut at some point will need to go through.

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In any downturn investors will be risk-off. Some argue there has been a bit of a VC bubble over the past 5-10 years and now that banks in general have seen their share prices drop across the board it would be expected that VC’s review valuations in banks overall in private markets. All companies will need to make hard decisions in the current business environment and there will be challenges across the board.

The culture does have to change to be more revenue focused - agreed. Monzo has much better unit economics (costs of servicing a client) compared to legacy banks and at previous events they have been open with such info, but recently they have not given any forecasts on when their cost per client might be turning positive.

The main thing which I feel missing right now is a clear roadmap as to what the company is working on, what their plans are, where they see themselves in the next 6-12-18-24 months. There is a lot less transparency than there was even a year ago


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This is really interesting. I don’t have a good technical understanding of these things and the pros and cons of this approach. Is there any benefit from the approach Monzo has taken do you know? Also is there any way to know the number of services other banks have?

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There can be an advantage to splitting up services like that when done sensibly. If you have enough employees that a decent size team is owning each service, and it has been separated in the right way it can help productivity. Taken to the extreme like Monzo and other companies have in my opinion just slows you down. The co-ordination required to update something which affects multiple services at once is a nightmare.

You won’t be able to know how other companies have architected their code unless you work there or they publicly share the information like Monzo has. I imagine most legacy banks have an absolute mess of an architecture because they’ve been around so long

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I agree. Especially as travel virtually stopped. There are reports of furloughs and layoffs. I don’t think there is a huge cause for concern, it might come back as a stronger company.

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Monzo will be absolutely fine,this is a small blip,as for Revolut they want and try to be everything to everyone and that means that everything becomes average. All you see constantly on their twitter page is complaint after complaint and I would also add that their customer numbers are way off. I guarantee that in 5 years time Monzo will be fly high and Revolut will be an also ran. I’m that confident I’ll come back on here in 5 years time.

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Monzo co-founder Tom Blomfield moves from UK CEO role to President

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I say Tom was told to stand down by the board and investors, and will leave the president role within a year. I appreciate they want to save face for the company, and for what Tom has done, but my opinion is that this was a condition of the investment and down round.

It seems way too coincidental to be happening on the cusp of a down round. 165 staff in Vegas fired, furloughing lots of staff, no new products in ages, lack of profitability and their competitors bounding ahead. I think this should have happened a long time ago to be fair

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Lots of change at Monzo lately. CTO, COO, and co-CEO have all left in the past 6 months or so. Now the CEO.

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It’s a good move in my opinion for Tom to step down as CEO, although I’m not sure how the dual U.K./US CEO role would work with TS Anil being based out in US.

Long term I think they will be fine, they still have a solid tech foundation, good UX and a strong customer community.

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Reading the news around this, it sounds temporary to me. I think we will see either a new UK or US CEO fairly soon after a recruitment process.

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Agree. Regional CEOs might make sense once a company scales to a certain size - Revolut adopts this and seems to be working so far.

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I don’t think he had any say in this to be fair. If a CEO is going to stand down before a funding round, it’s most definitely a stipulation of the funding round.

I do think this is a good move though. Based on online searches, it seems like GoCardless investors didn’t want Tom as CEO and went with Hiroki instead, Tom was fired from Grouper, Tom was fired from Starling and based on what’s happening at Monzo lately, it may be time to move on from him completely.

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I am surprised Monzo haven’t controlled the news flow here e.g. blog etc (I may have missed it if they have)

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I also thought the same. Guess they’re waiting for regulatory approval first


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