- Monzo rolled out its second premium account in three months.
- At a high annual fee, it could mitigate the neobank's massive losses, but it remains to be seen if customers are willing to subscribe.
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The UK neobank launched Monzo Premium, a £180 ($230) annual-fee account that comes with a steel card, travel and phone insurance, £600 ($766) in monthly fee-free withdrawals, and 1.5% interest on deposits up to £2,000 ($2,553), among other perks, the Guardian reports. This is the second paid account that Monzo has debuted in just three months: In July, it released its third iteration of Monzo Plus.
It has become imperative for Monzo to diversify its revenue streams and reduce its losses, which more than doubled in its most recent fiscal year (ended February 29, 2020). In July, the neobank said that the pandemic has led it to call into question its ability to continue operating.
Since then, Monzo has made incremental moves to up revenues: Beginning in November, it will impose a 3% ATM fee for withdrawals over £250 ($319) per month for some users who use Monzo as a spending account but don't engage with it for banking activities, like direct deposit or student loans. Chief product officer Mike Hudack underscored Monzo's laser focus on building sustainability, telling the Guardian that "everything we do needs to make money and be sustainable as a product."
Apart from adding fees, Monzo has been trying to monetize its customer base by striking a balance between products that are attractive, but also profitable. The retooled version of Monzo Plus, for example, deemphasized travel benefits that consumers would be unlikely to utilize amid the pandemic. That appears to be paying off, with the neobank reporting 50,000 new Monzo Plus active users in the first month of relaunching, but it will need to sustain that momentum in order to significantly impact its bottom line, as a £5 ($6.38) monthly fee at 50,000 users barely dents its latest annual loss of £113.8 million ($145.2 million).
Priced three times higher than Plus, Monzo Premium could make a bigger impact—though that hinges on customers' willingness to shell out the money. Hudack remains confident despite the current economic downturn that "if you build something that's really powerful that people love and they want to keep, you make money from that." But given their massive losses, it will likely take more than paid subscription accounts for neobanks to become profitable.
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