Perhaps well intentioned that people want two businesses they like to work together, and I also have small stakes in both. But itās 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 youāre 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 āmarketplaceā 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.
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 isnāt the aim of Monzo, and Freetrade to be inclusive? Isnāt 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 doesnāt 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, isnāt it plausible that most of the money may be elsewhere?
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 theyāve said they intend to tackle quick transfers).
The savings wasnāt really an āintegrationā though. It wasnāt an Investec account running through the Monzo app, it was a Monzo pot where they then deposited that money with Investec.
Letās leave the whys and wherefores of Monzoās 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. Youāre 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 itād be a useful thing to explore.
I think the thing weāre 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. Thereās 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 donāt 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 youād come to this conclusion. (Thatās not to say Iām right and youāre wrong - itās something that will take some time to shake out either way).
Ouch! Iām a Monzo customer (wages paid in and everything) and also a Freetrade customer. Iād 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 itās a big if) you want to partner with a bank for growth, Monzo is the one to pick, I think.
I canāt talk for Monzo, but I hear their founder still talk about wanting to be a āfinancial control centreā - the hub and spoke model. Personally, Iām 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.
Itās not about personal attacks or saying specific people arenāt wanted. Just a question of who is the target market at a macro level. And it wasnāt an answer to the question to say thereās no overlap between the two companies, it was a discussion point.
Overall my point is I donāt think I want to see Freetrade potentially constraining itself to fit into one bankās model. Iād 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. Doesnāt mean Iām right. Many here clearly disagree.
I think thatās 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 doesnāt mean that the model canāt 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 Iād like to see it considered in due course. I think that it could help during a growth phase.
The figures about account balance etc are mainly from not long after the end of the prepaid days so itāll 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. Theyād 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
Iām 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 Iād find it very difficult to keep my wages going in to a different bank!
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 isnāt insignificant, especially if you consider potential media coverage which will help further people to find out about Freetrade.
My point was more related to the fact that a huge percentage of those 2 million Monzo customers get their salary paid into another current account. Does it make sense for Freetrade to pursue those same customers effectively via a third party or would it make more sense to look at the much larger market share instead? By going to the banks where the majority of customers are paid they are more likely to be able to gain active profitable customers. The time and money could be better used elsewhere at this point in time. Just to be clear Iām not trying to be down on Monzo - the same could be said for many of the other fintechs.
The stats are changing quickly - Monzo posted stats a few months ago showing the number of customers paying their salary into Monzoā¦ it was increasing exponentiallyā¦
Personally, my wife and I are full Monzo for both joint and personal accounts. I have no complaints. In fact I would highly recommend it.
It was 30% last time figures were released but that was a while ago and was increasing all the time. Iād love the latest figures though. If you get paid into 1 account and use Monzo for your disposable spending isnāt that the perfect place to have the investing product?
I was against the idea initially but Iāve changed my mind after some debating the topic. It will normalise investing for many who are totally new to it. As Monzo has a younger demographic it will be customers investing may not otherwise reach. Offering something like the autopilot in the Monzo app will be the first exposure to investing and might encourage them to then get the Freetrade app and pick their own stocks to invest in.
At the moment itās just rumour and speculation. Itās better, I think to look at what - if anything - comes out of a tie up then make that evaluation.
I would say, though, that Monzo doesnāt (I think) go for exclusives, so theyād be nothing to stop Freetrade tying up with HSBC or whatever your bank of choice is, too. But ultimately neither you nor I understand whatās going on in Freetrade towers, what the trade-offs for doing this would be and what the long term strategy is.
Do they? I imagine itās around 50% and growing now who use Monzo as their real bank account, but we donāt know precise recent figures for that, just that it is growing. I think itās a significant and growing market (younger mobile-first bank account users), and crucially it is full of people who have money to save many of whom have not been exposed to the stock market, and will in later years be saving significant funds.
Given the different market it would IMO require different positioning/products to those available via freetrade (some sort of simpler product with tracker funds as Tom has indicated theyāre looking at, and Freetrade just mentioned they are working on as āautopilotā). So the different market is why itās a good complement to puling in users directly to freetrade. It also might function as a bit of a gateway to broader stock investing and picking stocks for those interested, but it could be valuable in its own right.
I wonder if it is via freetrade or will be using funds directly - fingers crossed as a freetrade investor that they decided to use freetrade to handle the investment side of things.
As @Rat_au_van mentioned above, it was 30% at the end of December:
Assuming static growth, itād be about 40% now.
But Iām not sure this really matters. Iāve set out before why I think this is a compelling proposition for both Freetrade and Monzo. Ultimately both want to grow in a way thatās sustainable and profitable. So if this works for both of them, whatās not to like?