Monzo: Getting ready for Open Banking


Last week, I finally got my hands on a Monzo card thanks to the London New Tech Meetup. There are currently 55,000 Monzo members and a waiting list of 200,000. Unable to keep my cool, I shamelessly took a smug selfie with my card and messaged my friends straight away. 
At this point you might be thinking, ‘What’s all the fuss about?’ Well, allow me to explain.

Joining the community
Monzo is a new challenger bank in the UK, currently still in Beta, offering a current account that lets you monitor and control your money via your mobile. The full bank launch is expected in early 2017 and will include all the basic functions you’d expect plus faster payments and lots of added extras.

As a mobile-only bank, Monzo have put technology at the heart of everything they do. The sign up process is a 5-minute job via the app - just about as long as it takes to brew a cuppa. The app interface is simple, intuitive and familiar. Payments show up in real-time, and with a couple of taps you can set up spend targets, freeze your card or transfer money to your phone contacts. Also Monzo have been seeking feedback from users, actively getting them involved with product development.

By delivering an exceptional user experience, Monzo have differentiated themselves in what appears to be an already crowded marketplace. But what does this mean for traditional banks?

The Open Banking Standard
In 2015 the Open Data institute called for the Open Banking Standard, creating new banking models to help consumers better manage their finances. The Payment Services Directive 2 (PSD2) is a data and technology-driven EU legislation, due to come into force in 2019, that will require banks to grant third-party providers access to customer accounts and data via APIs.
Whilst Open Banking provides a huge opportunity for innovation and transparency many traditional banks are worried by the implications. This new directive will allow more companies outside of the banking industry to challenge the ownership of the customer relationship. According to a US study 73% of millennials would be more excited by financial services from Google, Amazon, Apple, PayPal or Square than their bank. PSD2 will make this possible. 

However, rather than fearing or ignoring PSD2, banks should embrace it.

Embracing Open Banking
Monzo, alongside other non-traditional banking rivals such as Tandem and N26, is already embracing Open Banking, ensuring they’re ready to take advantage of the customer banking data that will soon become accessible. However - with their larger customer bases, wider range of resources and superior financial experience - imagine the opportunities this new data sharing could create for traditional banks: 

•    Real-time financial advice based on spend patterns and behaviours
•    Purchase predictions to offer customers the best deal available
•    Automatic money transfers across accounts to earn the best interest in real-time
•    The ability to collectively save or spend as a group i.e. save for a holiday or pay bills

How to prepare for PSD2
It’s clear that the opportunities presented by PSD2 are hugely exciting. By opening up their APIs, banks can learn from disruptors and, in collaboration with a wide range of third parties, develop differentiated products and services to delight their customers. Here are a few tips banks can take from Monzo’s example: 

1.    Listen to you customers –  involve customers in product and service developments early, e.g. Beta testing, to unlock valuable insights and strengthen your customer relationship
2.    Broker relationships with third parties – developing strategic partnerships will create the greatest possible value for your customers and drive differentiation
3.    Test, learn & iterate – continual testing and being reactive to what is and isn’t working will allow you to improve and innovate while maintaining business as usual 

Rebecca Vickery