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How new banks differ to traditional banks

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We know that there are lots of new bank start-ups out there, particularly in Europe where names like N26, Bunq, Fidor and Monzo stand out. In particular, the UK’s Monzo bank is notable. It is notable for a variety of reasons – the fastest crowdfunding of a new bank, the achievement of over half a million customers before they got their licence, the ambition to be the Facebook of banking – but it is particularly notable due to their fanbase.

Monzo has fans. Monzo is so loved by their users that having a pink Monzo card became a pick-up line for dates in nightclubs. Why?

First reason is that they inform you. I am often frustrated with traditional banks because they only tell me what I’ve spent. It’s a transaction app of debits and credits from the past, with no information about the future. Equally, the transactions are often confusing as all it tells me is a debit or credit. It doesn’t tell me about how, what, where or why that debit or credit occurred. This is one big difference with the new banks. For example, Monzo inform you. They tell you exactly where you used your card via Google maps, so you can see the store location. It tells you the categorisation of that spend – groceries, travel, clothes or whatever – and it allows you to easily share and split bills with friends through the app.

The second reason is that they are intelligent about your lifestyle. They watch your spending via software algorithms and look for opportunities to help you to spend less or save more. A great example is if you use the card for specific purchases on a regular occasion. Let’s take a specific example: commuting. Let’s say you commute to work via the subway every day. The cost is $15 a day. You could buy an annual travelcard that would allow you to travel every day for $12, saving over $700 a year, but the cost of the travelcard is unaffordable at $3,000. Digital banks like Monzo are intelligent enough to recognise this habit and challenge, and will tell you that you could save $700 a year if you take the travelcard, and offer you the ability to have one. The offer is actually a $3,000 loan for a travelcard but, because it is specific to your lifestyle and packaged as an informed offer, it doesn’t appear as a loan. It appears that you care. This is important as it makes these new banks very different to the way in which traditional banks appear.

This leads us to the third reason these banks are different, in that they really do care about customers. I often talk about traditional banks punishing customers with hidden fees and charges. The new banks are far more transparent and alert to charges, ensuring customers are aware of any issues or potential exposures. But they go further than this. I was quite surprised to see that Monzo wrote an in-depth update about the link between debt and mental health on their blog. In fact, the fact that Monzo has a blog is something, as many traditional banks do not have one.

On May 18, Monzo posted an item titled: “Disclosing Mental Health to Your Bank”, they talk openly about how debt and mental health are closely linked. Here’s a small flavour of what they said:

“Like all lenders, we have to get in touch with people who miss repayments or go beyond their lending limits and stay there for a while … we approach this process in the most empathetic, understanding way we can. And our priority is to find out what’s happened, work out how we can support you, and point you towards the right sources of advice. We’ll never send you letters with angry red writing, or a barrage of calls trying to get you to pay … if you owe Monzo money and are having mental health problems, it’s useful for us to know. If you tell us, we can work out what we can do to support you – whether that’s changing how often we contact you, pointing you towards other sources of support and advice, or just leaving you alone for a while.”

I have to say that this honest, open and transparent approach to money, lending and customers is a breath of fresh air, and that is what new banks need to bring: a breath of fresh air. Honest, open and transparent banking will be the differentiation that new banks can bring to the market and, as they do, old banks need to take note. The traditional approach to punishing customers with fees and providing almost zero information about transactions, let alone financial lifestyles, will no longer meet the needs of an increasingly discerning marketplace.

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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