Has Monzo lost its mojo? How the app-based bank has begun to lose the current account switching battle

In 2019, Monzo the app-based bank received over 63,000 switching customers from other banks, according to analysis of Current Account Switching Service data for This is Money.

In the last three months of 2019 it hoovered up 20,843 switching customers – more than any of the big banks in that period.

But fast forward to the end of last year, and Monzo had lost a net 2,079 switching customers – the first time the neo-bank went into negative figures.

And in the first three months of 2023, Monzo sustained an even steeper drop off of a net 7,635 switchers, according to the most recent data shows which banks people are leaving and joining using the official switching service.

The numbers, released four times a year, show Monzo’s net switching customers peaked in 2019. 

Best known for its coral pink debit cards, Monzo was one of the earliest of a number of new app-based challenger banks. 

It proved popular with customers for its easy-to-open current accounts via its app.

Some experts think the drop off in switching customers is a natural progression while others think the bank will need to offer cash bonuses like big rivals if it wants to see switchers return. 

Andrew Hagger, founder of MoneyComms, says: ‘If you use the official CASS figures as a yardstick, then it appears that Monzo has lost its appeal.’

Hagger thinks ‘this is likely to be partly down to so many players in the current account market offering £150 to £200 golden hellos.’

‘If it wants to compete with the big banks then Monzo would need to offer an equally attractive incentive – it’s just whether that suits Monzo’s current business model or is too much of a cost to bear, particularly with people increasingly jumping from one freebie offer to another.’

It’s true that banks have been offering cash bribes to new customers that have been more generous and speedier than ever before.

In 2022, Nationwide Building Society gobbled up almost 147,000 switchers in just three months – the highest ever recorded over a quarter period by the CASS. During much of that time it was paying £200 to new joiners.

A Monzo spokesman said these switching numbers paint a very small part of the overall picture. 

They said: ‘We are currently adding more than half a million customers per quarter and are the UK’s 7th largest UK bank, with almost 8million customers.’

Monzo defends its decision not to offer cash bribes to customers to open an account though. 

The spokesman added: ‘Unlike many others, we don’t offer cash incentives for CASS switchers, given our growth is strong and has always been largely organic, with the majority of customers hearing about us through friends and family.’

James Blower, founder of Savings Guru, believes Monzo’s number of switching customers tailing off is a natural progression. 

He argues: ‘Monzo has grown incredibly strongly and is probably reaching its natural peak for customers. It’s grown from nothing to 7.5million current account customers without paying switching incentives. 

‘That’s a very strong endorsement of its proposition and product. So I’d expect such a high growth trajectory to level off at some point.

Blower adds: ‘We’ve also seen high street competitors fight back with many copying features offered by Monzo (as well as fee free transactions abroad, the budgeting and pots features are now offered by other banks) and also incentives of up to £200 being offered to switch.’

Unlike other banks, Monzo does not bay cash bribes to switching customers given that its grwoth has largely been organic

Starling Bank could be the next challenger bank to follow a similar trajectory to Monzo’s drop off in switching customers, Hagger believes.

He says: ‘Although it hasn’t registered any net losses yet, Starling Bank is also showing a drop off in numbers and also doesn’t offer cash bribes as part of it’s customer acquisition model.’

Monzo’s most recent financial results issued in June 2023 showed an annual net loss of £116.3million, though this was slightly lower than the £119million net loss Monzo reported in 2022.

Blower says: ‘Monzo’s bigger challenge is to make money. I don’t think it needs to worry about losing a few thousand accounts when it has 7.5million of them – it’s going to now. 

‘The more fundamental challenge it has is turning a profit. While it has built a fabulous current account, it’s struggled to lend out the money that this generates in balances and this is where most banks make their money. 

‘It is baffling that it still hasn’t found a way to monetise this – and I think that’s a much larger problem.’