$1.6 billion challenger bank Monzo relaunches paid premium accounts with eye on profitability

Monzo Plus 02

London fintech challenger bank Monzo has launched a premium account service called Monzo Plus.
This is the startup's second attempt at paid accounts following a botched launch effort in 2019.
The service costs £5 ($6) a month and comes with a new blue holographic debit card.
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Challenger bank startup Monzo has relaunched paid accounts as the unicorn startup seeks to diversify its revenue and push towards profitability.

The Monzo Plus service will cost £5 ($6) a month and comes with additional features to entice regular account holders to upgrade.

Monzo Plus account holders will receive a new blue holographic debit card, and will be able to view and move money between up to 13 bank and credit card accounts in the Monzo app.

They can also shop online more securely with virtual cards, and will receive monthly credit score updates.

Monzo Plus also offers 1% interest on balances of up to £2,000. Monzo Plus users will also be able to withdraw £400 fee-free while abroad, up from the £200 monthly limit on standard account holders.

The startup bank, founded in 2015, offers current accounts to more than 4 million customers. It provides a number of financial services to consumers, ranging from a current account to saving pots and access to loans. The startup has predominantly relied on the wild popularity of its "hot coral" debit cards and easy-to-use app to win new customers, over conventional marketing.

It originally launched paid accounts in April 2019, but shelved the rollout just five months later after a poor reception from customers.

The product was not fully complete at its time of launch. When it was withdrawn, a Facebook group called "Monzo stole our money" contained nearly 1,000 members who complained that their accounts had been frozen without warning, according to Finextra.

A relaunch was originally planned for May of this year but was delayed due to the coronavirus pandemic. The outbreak also saw the startup lay off up to 80 staff and sign a new $76 million funding round from investors at a 40% valuation drop.

"With this version of Monzo Plus we went back to basics and re-examined how we built things," Mike Hudack, chief product officer at Monzo, said in a release. "We thought really hard about why people love Monzo and listened to our customers and community."

Competitor Revolut has had a premium service for a number of years with metal cards, trading capabilities, and travel packages part of its tiered offering. Germany-based neo-bank N26 also offers premium services and a metal card as part of its business accounts.

All eyes on Monzo's bottom line

The launch of paid accounts will be Monzo's first big new product push since its founder and CEO Tom Blomfield stepped down from the job in May. He was replaced by former US CEO TS Anil.

The company's revenue took a hit during the UK's COVID-19 lockdown, according to source with knowledge of the matter, but has since returned to near pre-pandemic levels.

Monzo officially reported a net loss of £47.2 million ($61 million) in the year to 28 February 2019.

Blomfield has previously warned the bank will continue to lose money, but the firm aims to become cashflow positive by the third quarter this year.

The startup is hoping to break into the US and has applied for a banking license, a process which could take up the 18 months.

When interviewed by Business Insider in February, Blomfield was bullish about the company's move to the US and said the bank was adding 200,000 customers a month.

The startup has raised £385 million ($487 million) to-date.

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