Monzo's investment account

Alternatively, how about a partnership with Oval Money? Theyā€™re soon to be testing some investment solutions through their app.

Now this is a mighty impressive customer base to tap :rocket: :fire:

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Simonā€™s shared a screenshot from the live(ish) counter on Monzoā€™s homepage there btw - in case anyone reading this later wants to check how many users Monzo has then :chart_with_upwards_trend:

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Now that they have a cash saving product available as a pot, we recently had a discussion over on Monzo about a Stocks and Shares pot. As an investor in both, Iā€™d be really keen to see this at some point - personally I think it could really help boost Freetrade growth, particularly with those who have little interest in investing, though I completely understand it wonā€™t be a priority for Freetrade right now.

The savings pot is interesting as itā€™s using the Monzo onboarding and user verification to make it a pretty much one-click process to open a savings account. I think Freetrade could do something similar and provide one-click access to a simplified account, while leaving the customer open to downloading the Freetrade app later and managing their investments in a more involved way, so it would be a win for Freetrade if there is a large base of Monzo customers who have never thought about investing in the stock market. I believe there is.

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I concur.

I did make reference to that in my previous Monzo :unicorn: thread.

I think itā€™d be a great way to supercharge user growth (when readyā€¦ there is still 70k people on the waitlist). With that said, I donā€™t really know about revenue share in such a partnership and it could cause unit economics to fall. Iā€™m sure the folks at @freetrade_team are exploring all avenues.

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I evidently have too much time on my hands, so cross-posting (I hope thatā€™s okay) something I was posted on the Monzo forum about integrating the apps:

Thereā€™s been talk over on the Stocks & Shares Pot thread about seeing this type of information in Monzo. Freetrade was mentioned, and Iā€™ve been thinking about how an integration with Freetrade might work.

Hereā€™s the pitch: :newspaper_roll:

  • Monzo + Freetrade = highly complementary
  • Monzo can unlock 1m+ additional users for Freetrade - when Freetrade is ready for them. FT can then monetise a large part of this market when they launch chargeable ISAs and Alpha (their monthly subscription product).
  • Freetrade can help Monzo in demonstrating a tight integration between the apps, and make the financial hub concept come to life. This data and demonstration will be valuable in attracting additional partners.
  • But Freetrade + Monzo can be more than the sum of their parts. What if they offered a set of pre-selected investment products that they user didnā€™t have to actively manage - a bit like Nutmeg - bought in a couple of taps from within Monzo? This doesnā€™t dilute the Freetrade proposition and a small mark-up and revenue share means that this might be a lucrative revenue stream for both companies.
  • Freetrade could do with better banking services - and live cash transfer from external bank accounts. Monzo could provide back-end banking services to Freetrade - for example by giving each Alpha customer a sort code and account number - making the lag of sending money to Freetrade a thing of the past, generating revenue for Monzo and making Freetrade slicker.

What would it look like in the Monzo app? :monzo:

  • New ā€˜investmentā€™ section in the new Account tab
  • From there, existing Freetrade customers see their Portfolio as an aggregated view. Tap to breakdown - still within Monzo - then when selecting individual stocks it takes you seamlessly to the right screen in Freetrade.
  • New customers get the ability to open a Freetrade account. Immediately with no hassle. App downloads in the background - Monzo shares KYC with Freetrade (with the userā€™s consent, of course) and youā€™re already logged in and good to go.
  • As a separate proposition within the Monzo app, users can tap to open a set of pre-prepared funds. Available exclusively within Monzo so not to dilute the Freetrade share-dealing proposition, charging a small commission would generate revenue for both companies.

How would they make money? :euro:

  • No cost to either party of showing existing Freetrade customer data within Monzo - this part of the integration just helps both companies grow
  • Assuming Freetrade sees value in growing its freemium customer base, Freetrade pays Monzo a referral fee for each account opened from within Monzo (Ā£5, say).
  • Similarly Freetrade customers opening a Monzo account would net Freetrade Ā£5 (same incentive as for the other Monzo account opening trials).
  • For the pre-selected investment products, Monzo and Freetrade each take a mark-up of 0.25 - 1%
  • Monzo charges a monthly fee to provision bank account services to Freetrade alpha customers (call it Ā£1/month)

(Note: all these figures are guesses and based on no real research)

This would lead to an ongoing, mutually beneficial commercial relationship, I think / hope.

What does everyone think? Is this an interesting model for folks like Monzo and Freetrade to look at?

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Perhaps well intentioned that people want two businesses they like to work together, and I also have small stakes in both. But itā€™s not without its flaws and issues which would need to be balanced out.

What if Monzo changes something on its end on how the integration works? Freetrade then has to divert time and money just to maintain the status quo and keep the APIs working, time which could be spent on their own product. Also a lot of effort in simply maintaining the relationship.

You either have exclusivity which is likely expensive, or end up being sat side by side with any amount of competitors.

You risk being seen as a part of Monzo, and relying on them too much, rather than being your own separate thing. This also potentially means risking other business opportunities elsewhere if youā€™re already seen as so close to them.

Are Monzo customers even the people you want? The average balance is something like Ā£150 and not many get their wages paid in yet.

Has Monzo even made any success yet of its ā€˜marketplaceā€™ beyond an Investec savings account, which was just Monzo getting a large account with them and dividing it up between its customers? I notice their Head of Partnerships only stayed there for around a year. Their language around it changed somewhat in their last annual report too.

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I always struggle with sentiments like this because circumstances change, people starting off at minimum wage can see their pay increase over time.

But in any event isnā€™t the aim of Monzo, and Freetrade to be inclusive? Isnā€™t Freetrade looking to give smaller investors a chance to avoid seeing their investment growth swallowed up by fees?

Finally the Ā£150 average account balance doesnā€™t tell the full story. A lot of people have a spending account, plus some form of savings/investment accounts. So since Monzo do not have the best interest rate, isnā€™t it plausible that most of the money may be elsewhere?

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They have several integrations planned this year (including Cash ISAs), and had to close the savings integration to new customers because it was too popular, so I certainly think the demand is there.

I think some simple integration with monzo would be worth the bother, because it would expose freetrade to a lot of people who would never think of downloading an investment app. It could also potentially deliver things like instant transfers and test out the open banking integrations which Freetrade has in its plans (this is how theyā€™ve said they intend to tackle quick transfers).

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The savings wasnā€™t really an ā€˜integrationā€™ though. It wasnā€™t an Investec account running through the Monzo app, it was a Monzo pot where they then deposited that money with Investec.

Customers donā€™t care how it is done, only that it works.

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Letā€™s leave the whys and wherefores of Monzoā€™s other partnerships to their forum! I think the point I was trying to make is that this could be a mutually beneficial commercial relationship.

You raise some interesting questions:

I think that - on a technical level - this is more likely to be Monzo consuming Freetrade APIs. Youā€™re right, I think, there would need to be agreement from both firms that this is worthwhile doing in the first instance. And it may well not be. But I think itā€™d be a useful thing to explore.

I think the thing weā€™re missing is that the financial services world is moving towards commoditisation and integration. With open banking, different accounts can be displayed together - or, with PISP functionality - you can have new apps effectively integrating your back end bank into a completely different banking app. Investment is slightly different, but the point is that we are heading into a world where bespoke integration is no longer necessarily a thing - and competitors (or frenemies, or unrelated companies) can be linked in a way that provides delight and benefit to the end user. Thereā€™s first mover benefit here.

I suppose this depends on perspective and what you think about the hub-and-spoke banking model. I think that it is something that will take a bit of time but will become massive. If you donā€™t believe that, and believe in a world of different and separate products except for some one-off partnerships and white labelling, I can see how youā€™d come to this conclusion. (Thatā€™s not to say Iā€™m right and youā€™re wrong - itā€™s something that will take some time to shake out either way).

Ouch! Iā€™m a Monzo customer (wages paid in and everything) and also a Freetrade customer. Iā€™d like to think Freetrade want me! More seriously, though, the stats on Monzo are all going in the right direction - 4k accounts opened daily, 30% (and increasing) of those being full-service, wages paid in, accounts. If (and itā€™s a big if) you want to partner with a bank for growth, Monzo is the one to pick, I think.

I canā€™t talk for Monzo, but I hear their founder still talk about wanting to be a ā€˜financial control centreā€™ - the hub and spoke model. Personally, Iā€™m not sure that marketplace is the right term - but as I suggested in my random thoughts, bringing on Freetrade would be a good way of either proving or disproving the model, in my opinion.

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Well I thought I was wantedā€¦

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Itā€™s not about personal attacks or saying specific people arenā€™t wanted. Just a question of who is the target market at a macro level. And it wasnā€™t an answer to the question to say thereā€™s no overlap between the two companies, it was a discussion point.

Overall my point is I donā€™t think I want to see Freetrade potentially constraining itself to fit into one bankā€™s model. Iā€™d like to see it, at least in the short term, focus on standing on its own and making its own in app experience that people want to use and keep coming back to, rather than seeing it through another platform. Doesnā€™t mean Iā€™m right. Many here clearly disagree.

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I think thatā€™s sensible. But done well (and I hoped to have covered that in my post) it would be a win/win thing - and that it could be done without any form of constraint. And other banks are available, too. Just because I bank with Monzo (and you clearly have your own views), it doesnā€™t mean that the model canā€™t be applied elsewhere.

There is, though, a question of priorities and what comes first for Freetrade. A Monzo (or other bank) integration is clearly not the most important thing at the moment - but Iā€™d like to see it considered in due course. I think that it could help during a growth phase.

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The figures about account balance etc are mainly from not long after the end of the prepaid days so itā€™ll be the next accounts that will be really interesting.

There are lots of people who have a vague knowledge of the existence of investing and are interested but have no idea where to start. Theyā€™d never seek out an investing app so an integration with Monzo would allow access to that market, who hopefully would eventually download the app. I change my mind every few days if I think this is a good idea or not, but after talking to some women I work with I think it would be worthwhile

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Iā€™m a Monzo customer but only transfer monthly spending money into the account. Do also have their savings account too but if they partnered with freetrade for freetrade pots and things like round up to deposit automatically into a freetrade pot then Iā€™d find it very difficult to keep my wages going in to a different bank!

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A post was merged into an existing topic: Monzo plans ā€˜Hargreaves for Millennialsā€™

I agree with you on this - integration can be excellent but perhaps at this point not a priority. Given the limited number of customers vs the total UK current account market that this quite significant piece of work may gain I question the value in pursuing this in the short term.

Access to almost 2 million Monzo customers isnā€™t insignificant, especially if you consider potential media coverage which will help further people to find out about Freetrade.

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