Yahoo Finance Troubled Monzo gained more customers from current account switches than any other bank
Startup bank Monzo, which is racing to become self-funding amid mounting losses, gained the most number of customers via current account switches than any other bank in the UK in 2020.
New data released by Buy Shares, which provides financial insights, said Monzo had the highest net gain of 51,285 between January and September this year.
This is good news for the company, which in July announced a loss of £113.8m ($149.5m) for the 12 months to 29 February 2020, a huge jump on last year’s loss of £47.1m, even as net income grew much faster than losses, jumping almost 300% to £35m.
At the time, Monzo said it faced a “pivotal” year with “significant risk” to the business due to the COVID-19 pandemic. The company has been forced to furlough and layoff staff, and suffered a large write down in its value. Founder Tom Blomfield said the business was now focused on “becoming a sustainable company that’s here for the long haul.”
Last month, it launched its second paid-for account in three months: a £15-a-month account that carries a range of benefits, such as travel and phone insurance, and offers a solid steel card.
Meanwhile new data shows rival challenger bank Starling came in second place, with 36,398 net customer gains this year via current account switching. Together, Monzo and Starling have a share of 43% of all new customer net gains through switches.
They were also among the biggest net gainers of Q3 2020, at 11,392 and 11,998, respectively.
The data “highlights the fast-growing nature of the digital banking scene in the UK. Factors like the convenience and good customer services are acting as a significant catalyst for the switch,” the report said.
“Furthermore, these banks attract lucrative welcome bonuses for new customers as one way of taking on leading established traditional banks,” it added.
READ MORE: Monzo re-launches £5-a-month 'Plus' account
All UK banks have a collective net gain of 203,947 new customers. Lloyds (LLOY.L) gained the least number of customers (67) while Santander (SAN) and Halifax (BNS) were at the bottom of the list, having lost 51,618 and 55,338 customers respectively. Danske (DANSKE.CO) lost the least number of customers (1,134).
In a UK survey of 2,000 people conducted in January this year, 41% said they were moving to digital-only bank accounts because of convenience. Around 39% said they were doing so because digital banks offer better rates, and 28% said it was because of the ability to conduct free transactions when traveling.
The report said the banking sector has experienced minimal switches in the past due to a lack of variety in the market, but positive news about fintech and industry disruption is helping challenger banks spur interest among customers.
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These banks have also been helped by the pandemic: UK authorities have encouraged citizens to turn to digital banking so that transactions can be made without physical interaction, the report said.
Challenger banks were prepared with the necessary structures to actualise digital banking, and some traditional banks were caught off guard as they had to assemble resources to make the online banking experience seamless.
However, traditional banks are trying to improve, focusing on “robo-advisors, more intelligent automation, and advanced analytics,” Buy Shares said.
In the UK, the Current Account Switch Service enables customers to switch their current accounts from one participating bank to another. The service has a reputation for being straightforward, reliable, and hassle-free. It is backed by the Current Account Switch Guarantee.
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