The COVID-19 pandemic is affecting a lot of different businesses all over the world Monzo, the UK challenger bank, has a very tough decision to make. A major financial impact on the bank puts the current business model in doubt.
COVID-19 and Monzo
Being a successful challenger bank is no easy fat. Monzo secured over 4.4 million users since its inception in 2015. A more than respectable number, and one that shows UK consumers want something different from financial institutions.
This success has now been hampered by the global coronavirus pandemic. In a new annual report, Monzo CEO TS Anil confirms there is a significant impact on operations. While the problems may be short-term in nature, they are of concern.
Currently, Monzo has sufficient liquidity to ensure normal day-to-day operations. Customers should not see any real issues moving forward. That being said, Monzo’s revenue streams are being affected by social distancing.
With spending in the UK and other countries on the decline, Monzo is generating fewer fees. Combined with lower interest rates from the Bank of England, things are not looking great. Earning less money on cash deposits is far from an ideal situation for any financial company.
Less Money, More Problems
In its current state, Monzo is unable to roll out new products and services as originally planned. With consumer interests shifting due to COVID-19, any pre-planned rollouts need to be adjusted. This further affects the bank’s revenue streams in a negative way.
Making matters worse is the lack of fundraising. In a previous report, it was confirmed how UK fintech funding is on a strong decline. For Monzo, this resulted in a 36 million GBP funding round, instead of the initially expected 60 million GBP.
What the future will hold for Monzo, remains unclear. Further layoffs may be an option to explore if push comes to shove. The company will already let go 120 employees. If the COVID-19 impact worsens, however, some very tough decisions will need to be made accordingly.