Tom Blomfield Raw START OF INTERVIEW 00:01:15 ST: Welcome to Fintech Insider Interviews. I'm Simon Taylor, from 11FS, and today, I have the pleasure of speaking with Tom Blomfield, CEO of Monzo. Tom, how are you? TB: Very well. Good afternoon. ST: Thanks for being back on the show. A little bit more dressed down than last time you were here-, TB: [Laughter]. ST: [Laughter]. TB: I'm trying to remember what I was doing last time, I-, I can't-, I was in-, I was dressed in black tie, but I can't remember where I was going. ST: Yeah, it was a tuxedo, some awards thing? TB: Mm. Who knows. ST: There's too many awards in your life. TB: [Laughter]. ST: So, um, let's just do a quick recap. So, we have a lot of international listeners now on Fintech Insider, so, let's just recap. Who are Monzo? TB: Sure. So, Monzo is a new, smartphone-based bank in the UK, providing current accounts to retail customers. ST: And you guys started more as a prepaid card with an app, and you're now flipping to current accounts. So, can you give me a feel for how many customers do you have as prepaid card users, and how many customers you have as a current account? TB: Yes. So, we launched a prepaid card as, sort of, a prototype. We always intended to get a banking licence and launch a current account, it was just going to take a bit of time, so the prepaid was a way of, sort of, getting early feedback. And it went way better than we expected. We thought maybe, maybe five or ten thousand people might take this prepaid thing, because it wasn't a full bank account, it wasn't fully featured. We hit almost half a million, before we-, we paused signups about three months ago, to start the migration on to the full current account product. We have a live counter on Monzo.com. As we're recording this, I think we're up to about 175,000 current accounts-, ST: Wow. TB: With a pretty-, a pretty regular stream of people over. We'll be serving notice to wind down the prepaid scheme at some point in January or February, I think, we're just going through the process of-, of notifying customers that they can upgrade, and-, and assuaging some of their concerns. I mean, 90% of people are very happy to do so, and 10% have-, have, sort of, these questions, like, "I love the prepaid card because of X, Y, Z. I don't want a current account, because my current account from Big Bank does all these nasty things," and it's a, sort of, process of education, saying, "Well, the current account actually doesn't do any of those nasty things your big bank does, so-," ST: Yeah. TB: "We really would like you to upgrade, please." ST: [Laughter]. TB: Because you can use it in exactly the same way as a prepaid card. ST: Yeah, so the use is the same. So, a couple of things there that interest me. First and foremost, would you-, if you had to do it again, would you launch the prepaid card first? And what did you learn from that approach? Because we've seen different approaches in the market. Atom have gone straight in to lending, we've seen Tandem buy Harrods Bank, and go that route, and look at a bit more lending. We've seen Starling build the fully featured, sort of, account, and now that's out there, it does a lot more. So-, TB: Yes. ST: Would you do it again? What have you learned, as well? TB: For sure, I would do it again. I-, the prospect of spending a couple of years without any customer validation, or customer feedback, really scared me. I had no idea if people actually wanted what we thought they wanted, and the prepaid scheme was a really good way of proving-, sort of figuring-, not even proving our hypotheses. Many of our-, many of the things we thought were wrong, and we figured out a bunch of other things that we didn't know. And so, the primary-, there are a couple of things that really were surprising and unbelievably valuable. One is how emotional people's relationship with their money is. How they're-, they're influenced by, not always rational economic factors, but behavioural psychology, more than anything, and emotion, and anxiety, and hope, and fear, and all these very powerful emotions. The second thing is, we figured out how to-, how to do viral growth. ST: Mm. TB: So, just before we paused prepaid signups, we were-, we were onboarding probably 65,000 or 70,000 funded accounts a month, with almost no marketing spend. So, we've figured out these, kind of, network effects and these viral mechanics that I don't think you could strategize. I think you have to just, sort of, through trial and error, figure that out, and so we've got this very, very powerful growth engine, that we're about to turn back on. So golden tickets will be coming back to the current account in January, probably. ST: Ah, you heard it here first. Golden tickets are coming back-, TB: [Laughter]. ST: Get-, get ready for those golden tickets, I know they were-, were much-loved, when they did appear. So, this-, but on the other side, what-, what lessons did you learn the hard way? Was there anything where you, kind of, look at it and go, "Ooh, yeah, I learned from that"? Because I see, you know, there were lots of outages, there was downtime, there was having to communicate with customers a lot, there's-, for example, there was having ATM fees. All these sorts of things. TB: Oh yeah. Yeah, I think it let us learn about a bunch of those things, that if we had-, if we were only now launching our first product in to the market, we would have had to learn all those lessons on the current account. So, do-, how much of your technology do you outsource to third parties, versus how much do you build internally? We got elements of that wrong, and we've been able to, because we had that early signal, rebuild a bunch of it internally, which we're now much happier with, for example. Or ATM fees. As you start to move in to a mainstream audience, you see ATM usage change. So, our super early adopters cost us in the region of £6 per year on ATM fees. When the heavy travellers got involved, that escalated up to £15, £16 per user per year-, ST: Yeah. TB: Which was not sustainable. And so, you're going to have to learn that lesson, at some stage. I prefer to learn the lessons early, to be able to fix them, and then have a product that-, that works well, rather than spend two or three years without any signal and then, you know, learn on the job, if you will. ST: And that customer feedback is crucial to being able to learn that, but do you think-, you make a really interesting point about, as you move in to the mainstream. Do you think you've been lucky, that you've had a customer base that wants your product, believes in your product, and likes how you communicate, and that changes once you become a mainstream bank? TB: I don't know. So, it's certainly-, it's not for everyone, and the debate becomes, how many people is it for? This, sort of, colloquial style we have, this informality, this transparency, it's definitely not for everyone. We think it's probably for 75 or 80%. Others might argue it's only for 5 or 10%. It's hard to prove that, sort of, predictively. You just look, empirically at, like, how big can we get? Frankly, it's not-, just engaging in that, kind of, hypothetical debate, at this stage, is sort of-, ST: Yeah. It's hard, isn't it? TB: Yeah, it's hard, and almost pointless. ST: Yeah. TB: It's like, other people have their strategy, we have ours, like, we'll see which one works. ST: Where did that informal style really come from? Did it just come as being entrepreneurs, and that felt right? What was the genesis of that? Or did it just happen, and you were, sort of, like, "This felt right"? I mean, what was-, TB: I don't know. I've-, I've-, looking back, it's hard to pin it down to a single decision, or a single person. In the very early days, Jason was really involved in, sort of, helping to shape our community strategy, and our, sort of, transparency. Before we had very many customers, Tristan took over as Head of Marketing-, Tristan joined as an intern, I think, like a-, Jason actually hired him as a-, I think he was, like, a community intern, or a social media intern-, ST: Wow. TB: He's now our Head of Marketing. ST: [Laughter]. TB: And a lot of it has come from him, and his personality, and this, sort of, very genuine, sort of, I don't know, just empathy, I guess. So, I don't know the answer to that. I think it's a combination of our personalities and, sort of, the things we believe. And also, it's just-, it-, it seems to work really well, it's surprising how well it works. But secondly, it makes life easier when you don't have to have, like, a dual narrative. Like, the internal story for your staff, and then the external-, like, "What are we allowed to say externally?" If it's just all of the same, actually, that is the way-, the same with our communication style. That's just the way we talk. ST: Jason always laughs at my PTSD from big bank days, when I've had to do-, [laughter] and one of the anecdotes I'm thinking about is changing terms and conditions that had to go in to telephony and to the post, and via SMS, and the arguments over where a word was placed by an auditor. Unbelievable. So, I think it probably simplifies things, from a-, from a cost standpoint, as well. But, when Monzo does go down, when you have technical issues, you tend to give a lot of technical information in to what the error was, and how you resolved it. TB: Yeah. ST: Do you think that's something you're going to be able to continue doing? Because, at the moment, you could argue, and I don't know if this is true, you'll know this better than me, that your customers are somewhat in that tech bubble, and they appreciate it, but mainstream customers might find that scary, or off-putting, in some way? TB: Well, so, firstly, hopefully, we have less outages to-, to explain away. Secondly, even now we have half a million customers, I would suspect less than 5% engage with that kind of content, or would understand it, if they did engage with it. So, already it's not-, we don't have half a million programmers as our customers-, ST: [Laughter]. TB: We have a few thousand. ST: Fair. TB: And it's-, I think it's just reassuring-, we have lot of mainstream customers now, and it's reassuring to them that their techie mates, sort of, had a look and went, "Actually, yeah, this seems legitimate." ST: Yeah. TB: So, I don't think we're a million miles away from the mainstream, already. ST: That's interesting, that, yeah, everybody's got their techie friend, and actually having legitimacy or credibility with them actually has a network effect-, TB: Yeah. ST: And you talk about this viral growth, so, I think a lot of products and services these days do come from the tech community. TB: Yeah. ST: It's the tech-heads that buy the Teslas first, and then everybody wants them. It's-, it's always that, kind of-, kind of way down. The one question we got from the 11FS team, when I put it out, that got the most emoji reactions inside Slack-, TB: [Laughter]. ST: Was, alongside current accounts, we really want to know if you've got plans to enable a joint account any time soon. TB: So, we publish our roadmap online. It is on our roadmap. I can't remember exactly where it is, 6 to 12 months out. It's not something we're actively working on right now, honestly. There are a few key features for the current account we need to get to first. Pots is something that is an enabler of joint accounts, so, "a joint pot" is a nice way to, sort of, get towards that view. We're-, we debate this internally, whether-, whether, sort of, joint Pots are enough, or you want a fully integrated, sort of, transaction feed. ST: Mm. TB: And it's really interesting, because I-, I think it's one of those things that do get really emotional, like, "I've married someone, and I feel like our finances should be intertwined. It's a symbol of our-," ST: Yeah. TB: "Of our oneness, and our commitment," which is a very emotional thing, and, sort of, some of our designers are like, "Well, you know, isn't it much more useful if you each know what you're spending, and then you combine it, sort of, at month end?" and it's like, "Well, no, it's-, it's an expression of our union." ST: Yeah. TB: So it's really interesting. ST: It's an interesting-, and everybody's going to be different on that spectrum-, TB: For sure, yeah. ST: Because some people might not be doing the joint account, or they are, and then they've got private accounts, and then they've got their own spending Pots. And so that emotional side of it, you just can't get away from. It's interesting. So, next one up was the news, recently, that the big banks just got an extension from the Competition Market Authority for their APIs and PSD2, around Open Banking-, TB: Mm. ST: So, as a quick recap for listeners, in the UK, the Competition Markets Authority had said, "Banks, you must provide data-level access to transactions and other bits of information inside a customer's bank account, to third parties, under this secure framework. My question to you is, did you expect this sort of activity? And what do you think of the approach of big banks versus challengers? Is something-, is regulation going to make a difference? Or are we really reliant on the challengers to change the market, and-, and the market's going to drive the change? TB: A lot of questions there. Um-, ST: Sorry, yeah-, TB: [Laughter]. ST: (? 12.49) one by one. TB: [Laughter] let's start with the first one. Did we expect this? This in-, this, specifically? No. Some kind of rockiness? I think we described it as, like, the implementation was going to be rocky, there were going to be, sort of, hiccups and delays, this is one form of rockiness, so, not unanticipated, for sure. I also-, it goes back to strategy, really. There are people in the industry who have, kind of, pinned their colours to the-, to an API strategy, or to a, "You could build Monzo on top of the APIs. Why do you bother getting a banking licence, building all this tech, raising all this money?" blah, blah, blah, blah, blah, "You should just do it on top of APIs." And that-, there is a theoretical purity to that argument, but a practical reality that makes it really difficult, which is that these APIs are going to be slow, and going to be broken, and just won't work, to start with, and I don't want to gamble the future of my business on the big banks, sort of, opening up really easy to use APIs. I'd much prefer to have control in-, in my side of the court, and, yeah, take all the pain, and upfront cost, and compliance, and risk, and regulatory burden, that we've gone through for the last three years, but then have almost entire control of the full stack. ST: Mm-hm. TB: I think, in a period of time, you could rebuild a Monzo, or a, whatever the winning model is, on top of a pure API driven model, but I think that period of time might be five or ten years away. ST: Yes. TB: So, I think the-, the immediate future of Open Banking and PSD2, is going to continue to have trouble, until it doesn't. [Laughter]. ST: (? 14.33) the moment in which it flips. And, my own thesis on this has been, yeah, for some time we're going to see disappointing results from the big banks in terms of APIs, because where's the carrot? Like, where's the upside? They-, they have a large percentage of the market, and do they need to be opening themselves up to potential competitors to them? TB: Mm. ST: Versus somebody who's coming in to the market, to acquire new customers, that can offer a new feature, that hasn't lost that customer yet, there is only upside. TB: Yeah. ST: It's a bit less zero-sum. TB: For sure. Yeah. Or it even shrinks the market size entirely, which is-, which is really painful for big incumbents. I mean, you do see-, you see some of the big banks, so HSBC brought out their aggregator app, I think, so, some of them-, and they've all got an API strategy, I think, but it's-, I don't think they're as enthusiastic about that as they are just maintaining their-, their existing propositions. ST: And it feels to me like just another compliance programme, rather than something that could be a strategic opportunity, that's across the top and bottom and middle and-, and throughout the organisation, being grasped with both hands, quite the way it possibly could be. TB: For sure, but it varies, bank by bank, I'd say. ST: That's-, that's a really interesting, interesting perspective. So, you-, the reports, recently, that you "may" quote on quote, do an IPO in the next three years-, TB: [Laughter]. ST: How-, do you know where this came from? Do you know how true that is? TB: Yeah. I do know where it came from. It was my sloppy copywriting. ST: [Laughter]. TB: So, you can trace the first mention of an IPO back to our-, maybe not the first, a prominent mention of the IPO back to our annual report, where I wrote a three or four-page, sort of, introduction, explaining what our strategy is today, and what it will be going forwards, and we warned crowdfunding investors that they weren't-, they wouldn't have liquidity any time soon, basically. That's why we talked about IPOs. Like, the only way you're going to-, if you invest in Monzo, you get shares, there is no liquid market for those shares today-, ST: You can't sell those shares. TB: You can't sell them, and you will only be able to do so at an IPO. That might be five or seven years away, is, sort of, the message we put out with our crowdfunding. ST: But you haven't said, "It is going to be." You said, "It might be this period of time-," TB: Yeah-, ST: For so much to happen (? 16.38). TB: Yeah, but then what happened after that was we-, we started advertising for a-, a Chief Financial Officer-, ST: Right. TB: A new CFO, and in that we put, "You may do an IPO in the next three to four years," and then the Financial Times and the Telegraph got very, very excited and, "Oh, Monzo's accelerated its IPO plan!" It's like, well, or Tom's just a, sort of, sloppy copywriter [laughter]. ST: [Laughter] and/or you're trying to attract a very strong CFO-, TB: For sure. ST: Who might appreciate the challenge, and that sort of thing. TB: Yeah. Yeah. So, it's-, we don't-, we don't-, we don't plan a roadmap, or a business strategy, in the same way that a big bank does. When you're growing between 1 and 4% a year, it's really easy to plan. ST: [Laughter]. TB: Last year, we grew, I don't know, over 1000%. We grew 5% week over week. And so, trying to plan on anything more than about a, a 16-week timescale, is basically impossible, so, to say an IPO is going to be two years, or four years, or seven years, is, frankly, anyone's guess. We-, startups operate in a, sort of-, in an environment of very high uncertainty, and it's about retaining optionality. Keeping your-, you know, keeping the options open. Being able to react to changing market conditions. Or, we launch a new product feature that accelerates our growth threefold. Or, we launch another product feature that totally fails. You can't really forecast the business in that-, in that environment, you really have to play it by ear. So, yeah, we will IPO at some point in the future, I-, I bet. I don't know when that's going to be. ST: It's an interesting alternative to the City A.M. headline of, "We get several offers to be acquired per month-," TB: [Laughter]. ST: Which, again, City A.M., shout out, Lynsey Barber, and everybody at City A.M., great headline choice-, TB: [Laughter]. ST: It-, so, is acquisition off the table, in your mind? TB: It's not our goal. ST: Yeah. TB: I can't rule it out, because stuff changes. For me, sitting here today, an acquisition would feel like a failure. ST: Mm-hm. TB: I'll probably regret saying that in-, ST: [Laughter]. TB: Three or four years. ST: Somebody will spin it out of context, or something. TB: But you know what I mean. Like, the companies that really make an impact on the world tend to be those that stay independent, that IPO, and are strong, founder-led businesses. The Googles and Facebooks of the world. The ones who get swallowed up do so because they weren't able to meet their objectives on their own, and they need-, they need more support, or whatever, and that might happen to us. I-, I really hope it doesn't, but-, so it's not Plan A, for sure. ST: Interesting. Interesting perspective. And I think-, I speak to a lot of, you know, more cynical bankers, who suggest, "Oh, once they're acquired, they'll just become like First Direct, and it'll be a nice challenger brand, and it'll go away, and surely that's the only possible exit." So, what do you see as, like, the longer-term business model? Because people have thrown this at Monzo for some time, is like, surely a current account by itself can't be profitable. I think you've answered that before, but, has that thinking evolved, in terms of where your profitability's going to go? Because I saw, you're looking for a VP of Lending, right? So, you're definitely looking at lending, now, as potentially a business line. TB: Oh, for sure, and we-, we've intended to do balance sheet lending from day one, it's always been part of our business plan. ST: Mm. TB: I see it as a medium-term revenue driver. The long-term-, I think-, this sort of worries me, if everyone agrees on this being the end game, it probably is wrong, but, I think there's, sort of, consensus within the, the fintech industry, I guess, that the winning model is a-, is a hub, is a control centre, is a platform or a marketplace. So, as a consumer, you have a set of different financial needs, you have diverse different providers. Maintaining 15 or 20 accounts to manage your money is a pain in the arse, and wouldn't it be nicer if that was all brought in to a single place, to give you visibility and control? So, that's our endgame, that's what we're aiming for, but it's also what a lot of other people are aiming for. So, Tandem, probably Starling, probably Revolut, N26 in Germany, a lot of the aggregators and price comparison sites all have this, sort of, end game in mind. It then becomes a question of-, of tactical execution. Of, like, what is the best entry vector, or attack vector, to-, to try and get there? Because it-, it has massive network effects, it has huge economies of scale, and the business model there is basically that we become your, sort of, trusted-, financial advisor is a tricky, regulated term-, ST: Mm. TB: But a, sort of-, ST: Financial partner, maybe-, TB: Yeah. ST: Or, somebody-, somebody that's on your, like, I'm struggling to say something, without coming up with a marketing slogan for another bank-, TB: [Laughter]. ST: Do you know what I mean? Like, it's-, it's standing next to you, it's, kind of, got your back, kind of thing. It's-, TB: Yeah. Jason always used to say it's like a good waiter. ST: Yeah. TB: Um. It's-, so, anyway, that's the model we're going for. Basically, a marketplace that helps you find, and pick, and interact with these different service providers, that saves you money, or earns you money, or, um, saves you time, and takes some kind of service fee, or affiliate fee, or profit share, off the back of that. A simple example. As your bank, it's pretty easy to tell when you've gone from a fixed rate gas and electricity tariff to a variable rate. If you switch back to a fixed rate, you typically save £250 or £300 a year. 60% of households don't do that. This marketplace, in the future, could make that really, really simple, and, for the convenience of saving £300, what's a fair profit share? I don't know, £30, £45? So, it's that kind of model, times 15 or 20 different products. It's your mortgage, it's your car insurance, it's your phone bill, it's-, it's your savings investments, your ISA, it might be cashback from-, from retailers. All of those things aggregate in this-, in this control centre. That is our ultimate end goal, but you need massive scale to make it work. ST: And what's your thesis on how you get there? How do you become the choice for consumers to get there? TB: So, we're taking a-, we're taking the approach of, like, going with a current account, and, yeah, trying to get people's salaries in, which, as many, many people on Twitter have noted, like, has historically not worked for loads of people. I think-, but it's the one we're betting on, and we're seeing great early data on people actually putting their salaries in. So, a few, kind of, tactical points. One, make it really easy to get started. So, let-, let customers dip their toes in before they fully commit. So, you can get a hot coral card, put £100 on it, and away you go. You don't have to start with your salary. Most, sort of, explosive consumer internet companies have that very fast onboarding. Second, you have to build in virality, or network effects, somehow. Users have to get other users. You cannot pay linearly, or even sub-linearly, for acquisition. As you grow, acquiring customers via paid advertising typically gets more and more and more expensive. ST: Mm-hm. TB: You never reach mass scale like that. Companies like Facebook, or Twitter, or Instagram, or whatever, always have these viral loops built in. So, you need really, really fast onboarding, you need the viral loops to-, to get more customers in, to build the massive scale. Then you need access, or visibility over all of their-, the, kind of, transaction data. Typically, that's salary, it's direct debits, it's standing orders, it's where they're spending. And then you need to go and find an ecosystem of partners who are willing to plug in, and-, and, sort of, give your customers better service. ST: Mm. TB: I mean, it's a phenomenal undertaking, and I think it's going to take ten years. ST: So, that's a heck of a journey you've got in front of you-, TB: [Laughter]. ST: So, ten years to IPO, maybe. Who-, TB: So, the flipside, though, the counterpoint, the argument, it's like, you're spending all this time doing all these hard things. Why don't you just build an aggregating hub on top of the banks? You don't have to get the salaries, you don't have to get people to switch, you deliver them 90% of the benefit with 10% of the effort, and you'll build massive scale. ST: But, per the CMA delaying, right, can you count on that, I wonder? I think I'd probably agree with you on that assessment. I'm curious, though, as to, like, have-, has anybody been annoyed with you yet? And has anybody gone, like, "Just let me have my prepaid card, damnit, I don't want a current account"? Because I've had that experience, where I've gone to pay for something at Sainsbury's, there's a giant queue of people behind me at lunchtime, and it's like, "Do you want our current account?" It's like, "No! I just need to top up so I can pay for a thing!" TB: [Laughter]. ST: Like-, TB: We've had, so, something like, of the people we've prompted, 95%-, even higher, probably 99% of people are like, "Yes, definitely, I'll do it." A bunch of them, like, drop out along the way, because they're like, "Oh, I don't have my passport and my driving licence on me-," ST: Mm. TB: Or, "The-, the card's been posted, and it's sitting on my-, my table top at home, and I'll get round to activating it," so, it's like any acquisition funnel, there's drop-off-, ST: Yeah. TB: But 99% plus of people are super engaged and happy. The minority-, the very, very small minority, and I don't know what the numbers are, but it's a very, very small number of people, said, "Actually, I don't want it," and we call them up, and we-, we've talked to hundreds of these people-, ST: Interesting. TB: To try and understand why. And what they say is things like, "Well, I really like, with the pre-paid card, that there's no overdraft. I can't-, I can't go in to an overdraft accidentally." It's like, "Well, what if that was true of the current account, as well? What if we didn't slam you with-," ST: Mm-hm. TB: "Unfair, unauthorised overdraft fees?" And they're like, "Oh, yeah, that would be great, but all banks do, so, I don't want a current account, because all banks screw me over." ST: [Laughter]. TB: So, there's sort of an education point, that, actually, you can use the current account exactly like the prepaid card, and we-, we are doing migration for selfish reasons. ST: Mm. TB: Because the prepaid costs a tonne to run-, ST: Mm-hm. TB: Because it's based on a bunch of third-party infrastructure, and by migrating it over, it lets us build a sustainable business, to keep providing the service that people love. We couldn't make the prepaid model work long-term, and so, yes, you might love it, but it's just not sustainable. ST: Yeah. TB: And so, by switching over, you can retain all of the benefits, um, it really is-, when we talk to these hundreds of people, it really is these hang-ups that they associate from their old big bank. "My old big bank did these nasty things on my current account. Therefore, I want to stick with the prepaid card, because I worry you're going to do all these nasty things," and it's-, it's just a process-, ST: It's these emotive things, again, it comes back to those emotions that are-, that are preventing people moving forward. TB: Yeah. Or, like, "My credit score's going to be impacted." Like, "I'll go overdrawn, I'll get a load of fees, and then I won't be able to get a mortgage," and it's sort of, like, explaining to people how this actually works. Which can be tricky. ST: It can be very tricky, indeed. So, I guess, has it been really difficult, kind of, getting your head around the-, being loved as a prepaid card, to being potentially the E Corp, you know, like, everybody sees banking as being evil, and, can you educate people that it's been-, yeah, it's an interesting set of ideas to play with. TB: I don't think most of our customers know, or care, about the difference between a prepaid card and a current account. ST: Interesting. TB: I don't think they should have to care. ST: Fair. TB: I think it's something bankers obsess over, like, "What is the underlying financial product?" and, for our users, it's like, it's a Monzo card and an app. It's like, yeah, we're sorry we have to replace your hot coral card with another hot coral card, but, like, nothing's going to change. You know, no worries. ST: It'll be the same experience. TB: Yeah. ST: So, as we get a little techie, do you have any plans to really ramp on the Android side? Or do you see iPhone as being still the test bed for everything you're doing? I can see you're holding a Pixel-, TB: [Laughter]. ST: I'm-, I'm also holding a Pixel, so-, TB: [Laughter]. ST: Which, by the way, on our emoji wall of fame-, in fact, everybody in this room, Michael, and Producer, Laura, all have Pixels, so, you listeners, and David and Jason, there you have it, your iPhone X is just not good enough. But, on our emoji wall of fame, like, Pixel was put way down, and it seems like, certainly, the in-crowd of fintech doesn't really favour it. But, if you're playing to a mainstream audience-, TB: Yes. ST: Is that something you have to ramp on? TB: For sure. And that is-, that is the reason I got a Pixel. I was an iPhone user until about six months ago-, ST: Mm-hm. TB: And we weren't taking Android seriously enough, as a company-, ST: Mm-hm. TB: Because 90% of the company uses iPhone. Frankly most, not all, I'm going to get flamed on Twitter for saying this, but most of the tech early adopter crowd skews towards iOS, not Android. Most of our early userbase, even before we had a product out, was 90% skewed to-, to iOS. It's now about 60% iOS, 40% Android, still skewed, but, as we go more mainstream, absolutely, we have to take it seriously. So, our Android team is now seven developers strong, or something, I think. We built the first iPhone app with one developer-, ST: [Laughter]. TB: In nine months. So, you should see it improving pretty rapidly. I've got an early build, with the Pulse graph, on Android, now, so that's coming soon-, ST: Ooh. TB: Pots, I think, are live-, the-, all of the monthly budgeting stuff should move more quickly. It's-, the challenge is just aligning the two platforms. It's, sort of, we're working, feature by feature, now, across both iPhone and iOS. The issue becomes, like, if one is ready before the other, do we delay it on one platform, in order to get the other one up to speed, so, like, everyone's, sort of, worse off, because we delay everything? ST: Mm-hm. TB: Or, do we launch it early on one, and-, and risk pissing off half our userbase? Typically, we've gone with the just launch it early, and, kind of, be transparent-, ST: Yeah. Well, there's definitely a feeling, from us Pixel owners, that you can end up being a second-class citizen, but, the prepaid card holders could potentially feel the same if-, if-, if they're not converted over. I'm guessing you're going to not put new functionality on to the prepaid cards, and it's all going to be current accounts. TB: Absolutely. So, I-, Pots came to only current accounts, not prepaid. We won't be developing more features for prepaid, it will be going away in the first, sort of, quarter of next year. Oh, Android Pay, that's the thing that came to Android, before iOS. ST: Ah, well, yeah, that-, that would make sense. It would be nice to see a-, TB: Tokenised payment capabilities, let's say. ST: There we go. Nerding out. So, for those of you watching, you can see that Tom lit up, and nerded out for us, but for the listeners, that was-, that was quite fun to see. So, I briefly intimated at what was the biggest lesson you'd learned in the last year, and what would you differently, I guess it's interesting, I saw a headline about, "Is Monzo the Facebook of Banking?" suggested by the Guardian this week, maybe it's headline writers that need to be avoided-, TB: [Laughter]. ST: But-, but where do you see yourself, realistically, in terms of scale, in three or five years? What would great look like? TB: Yeah-, ST: And what have you learned that you'll be using, in the next couple of years? TB: Uh, so, I'll-, I'll answer the first question-, the second question first, which is, sort of, what have we learnt, and what are we using? Um. I wish we had developed our lending functionality in more depth, six or nine months ago. ST: Yes. TB: Getting to profitability per customer, or even marginal profitability, i.e. they-, each customer drives more revenue than they incur in costs, allows us to scale without burning more capital-, ST: Mm-hm. TB: Broadly speaking. If you're marginal loss making, every new customer just burns more cash, and you just dig yourself in to a deeper hole. So, we've got some really interesting lending products coming out very soon, that fit in really neatly with-, with Pots, and the idea of cashflow smoothing, so, I'm really, really excited about that, but I'm also sort of annoyed that we didn't work on it six or nine months ago. ST: And how do you position new lending products versus being an evil old bank, that's just trying to gouge you with fees, or catch you in the overdraft? TB: Yeah, so you don't have any hidden fees or charges, you make all lending products explicitly opt-in. I.e. you never accidentally slip in to it, you have to say, "Yes, I'd like to take this product," and you give people full visibility, upfront, of what-, what the total cost is going to be. ST: Mm. TB: Like, "This is the maximum it could cost you. Do you want in?" ST: And in-, and in real currency, rather than APRs, and that sort of thing. TB: Yeah, and most people, from our-, from our consumer research, much prefer pounds and pence. We have to show APRs in some cases, but they'll always be with a pounds and pence figure that people can, kind of, hold on to. Knowing, "Okay, I'm a week away from-, ten days from payday. If I borrow now, the maximum I possibly pay is £5," that's really reassuring to people, to know, "My maximum exposure here is £5, that sounds reasonable. That's a pint in a trendy London pub." ST: Yeah. TB: So, those kind of principles, like, not gouging people on hidden fees and charges, but then, also, fitting it with people's mental accounting. So, Pots is just-, Pots is one of those features that shouldn't work so well-, ST: [Laughter]. TB: You know? It-, it's-, I had-, there was a long debate on Twitter about stuff being merely presentational. You know, it's not hard technology, so it's almost, it doesn't matter. Customers interact with this presentational stuff, and it really impacts them. So, being able to sweep some of your money aside, so it's out of view, actually has-, has almost as much impact as, like, literally locking it away. So, if it's not visible to you, you feel like you can't spend it. It's-, it's really emotional. ST: Yeah, it's that human side of it, again, that emotional side of it. Jason often talks about the-, the various different cargo cults have been human-centred in design, and, kind of, I-, I observe, in the work you're doing, and the work great consumer internet companies do, as being about that, sort of, 1%, that 0.1% of tiny tweaks, that everybody else thinks is pointless-, TB: Yeah. ST: Having logos in the-, in the stream. Having, kind of, cleaned up transaction information. Having a Google Maps. TB: Yeah. ST: All of these things feel like silly little presentation things-, TB: Yeah. ST: But, actually, when you get in to the reasoning behind them, they make more sense. TB: Yeah. ST: So, what do you think the-, the lessons for that, for bigger banks might be? Or, for-, for as you design new products, in lending, especially? TB: It's-, this is really easy to say, and the big banks, themselves, say it. It's just start with the customer. When you're starting out, thinking about a problem, like, a problem space, don't start with your existing product set of mortgages, and overdrafts, and credit cards, and fixed-term loans, and you shouldn't be asking, "How can we tweak these things?" you should be-, this is such a cliché, but you start with the customer. You actually go and talk to the customer, and have a conversation about their life, and the challenges they face, and the worries they face, and their hopes, and-, and their dreams, you know, really, it's these-, these clichés, but it really works. ST: But when you say talk to a customer, I think that hidden in that sentence is a-, is a different tactic. There's a customer experience team who do research from customers they've never met, with a third-party research firm, that package that and put it in to PowerPoint, and build personas, that hand that to a design team-, TB: [Laughter]. Yeah. ST: Sorry, the PTSD's coming out again-, TS: [Laughter]. ST: But-, versus-, TB: No, actually go and just talk to some customers [laughter]. ST: Yes, like, they're-, they're there in meat space, you know-, TB: We've had people join from big banks, and in their first, sort of, month on the job at Monzo, we just make them go and talk to 40 or 50 customers. And they've come back and said, "A) it was amazing. Like, I misunderstood so much about how these people live their lives, and B) I've worked for 15 years in a big bank, and I never actually talked directly to a single customer." ST: Yeah. TB: And I just-, ST: Or an engineer. TB: It's-, yeah, it's absolutely crazy. So, it seems obvious, yeah, just talk to people, and understand them, and apply, sort of, empathy. ST: So, what's exciting you when you're getting up in the morning, these days, and coming in to the office? What's-, what's the thing that you go, "Yes! This is why I'm here!" TB: This podcast, Simon. [Laughter] ST: Well, yeah, no, we're-, we're The Little Engine That Could, (? 35.39). TB: [Laughter]. That's a good question. I love working with our product and design teams. And our engineering teams. So, my favourite meetings every week are those where we're looking at how recent product launches have done, what the consumer feedback is, so, recently, it's been all about this whole upgrade process, from prepaid to current accounts. We're doing a tonne of user research every week, we're, you know, anyone who drops out at any stage, we go and interview them, and sadly distil it out-, (? 36.10) distil it down in to a PowerPoint deck that we present at our-, our meeting. And then figuring out what product tweaks we can make in future. So, I love working with design, product and technology, to-, to figure out the evolution of the product. ST: But it's kind of hands on product stuff you're doing, at CEO level. Like, you are still really wanting to know these metrics. It's not, sort of-, TB: Sure. ST: Just, kind of, flying around in jets yet. TB: To the frustration of our product and design team, yes. That's [laughter] absolutely true. We all-, we all, really, get very deep in to our product, sort of, metrics dashboards. We use Looker, on top of BigQuery, it's absolutely amazing. So, you can dig in, from literally a single customer doing a single thing, to cohorts of people over many, many months. ST: Mm-hm. TB: You can see, in real-time, how new product rollouts area going. ST: Explain cohorts. Because this is something that I've been really delving in to, in the last, sort of, 12 months, as I've been in to the journey of startup land. Explain that, versus other ways of looking at metrics. What is a cohort, and how-, how do you look at change over time with cohorts? TB: So, the use of, sort of, cohort analysis, I guess, is-, is most pronounced where you can iterate really, really quickly. I.e. your product is changing quite rapidly over time, and so you might say-, you might segment your cohorts on the basis of the week in which they signed up, or the month in which they signed up. So, all of our customers who signed up in August, versus September, versus October, versus November. How are they performing, on some metric you care about? That might be how much are they contacting customer support in their first two weeks? Or, how many transactions are they making? Or, are they still retained, after a period of time? So, after-, after 60 days, say, how many of that cohort are still using Monzo actively? And, the great thing about cohort analysis is, basically, very quickly over time, you can see if you're making it better or not. So, the August people may be only retained at 55%, but the October cohorts are now retaining at, I don't know, 70%, because of-, and you can really-, if you A/B test it, especially, you can really pin it down to specific product changes, which is pretty cool. So, we run cohorts on all sorts of stuff. Our big thing at the moment is-, is unit economics. So, we can track the cost and revenue, the marginal cost, the marginal revenue, generated by any single customer, and then we can put it in to cohorts. So, we might say, "We made these product changes-," it might be time-based, or it might be-, I actually looked at gender the other day, just to see if there was a difference, or iOS versus Android. And you can basically see if these product changes are having a positive influence over time. ST: And you can really see that on the top and bottom line, directly within-, within the cohorts, and the changes. That's really, really interesting. I think it's something that, in startup land is super well-known, it's kind of normal for consumer internet companies. Not normal in financial services, certainly with the people I've spoken to, so, thank you for, kind of, sharing that. So, before I let you go, I'm going to ask you to just do the ridiculous thing. We always talk about Clouds and dirt at 11FS. Like, the tactics we've talked a lot about, but what's-, what's your hopes and dreams in, you know, sort of, you're retired, in 20, 30 years' time, and you look back on Monzo, what did it do, and where is it? What do you-, what change do you want it to be? TB: So, on the front page of our investment deck, for the last, at least four or five rounds, it says we're building a powerful financial control centre for a billion people around the world. So, I think we have the opportunity to-, to build this service that makes people's finances effortless. That improves their lives in-, even in just a small way, to reduce anxiety or stress, or give them more control, or visibility, or save them money. So, I think we can have a positive impact on people's lives, and I want to multiply that by as many people as possible, to-, to basically, to, sort of, leave the world in a better state than we found it. Like, ultimately, that has to be, other than a psychopath, I guess, that has to be everyone's goal, right? ST: Yes [laughter]. TB: I don't know-, ST: But-, but not the, "Make the world a better place," type thing [laughter]. TB: [Laughter]. Yeah, and reduce any of these, sort of, corporate missions in to a soundbite, and they-, they sound like clichés, sort of, I think that's how they happen. But yeah, produce a positive change in the world, and, like, have that impact over as many people as possible. And it's a-, it feels like a 10 or 15 or 20-year journey. It-, it is this powerful financial control centre. I think someone's going to build it. I think WeChat, actually, are really close to building it for a billion people in China, already-, ST: Yeah. TB: But I think someone will do that for the western world, this aggregating platform that-, that manages all of your money. That's where we're going. ST: And why would that be you, and not big tech? TB: Gosh, how long have you got there? Um. Because I think each of the big tech companies have their own, sort of, sweet spots, their own DNA, the things they're really good at. And, to be really good at managing your money, I think you need a set of attributes that the big tech companies don't have. Like, huge amounts of trust, being one. Facebook, for example, is really, really good at social. At viral growth, and social. It's WhatsApp, and Instagram, and Facebook, and Facebook Messenger, really, really good at building huge communities, but relatively low trust, I think. Google is really good at web scale platforms. Gmail, Google Maps, etc. Apple is really good at high-end devices. Amazon is good at-, at selling stuff, really, really, really cheap. None of those, I think, are in the sweet spot of the trusted confidante that manages your entire financial life. I think, for any of the tech companies to get there is quite a big leap from their core mission. They might still get there, who knows? ST: It's interesting you use the word "trust". Banks always talk about trust being their-, the thing that they've got that big tech hasn't, but something that's born of tech, that builds trust with customers in a different way, is certainly an interesting prospect. So, Tom, for those living under a rock, where do they find out more about you, or Monzo? TB: [Laughter]. Uh, we are @Monzo on Twitter, or Monzo.com on the interweb, or you can download our app from the-, the Google Play store, or the-, whatever the iPhone equivalent's called now, I've forgotten-, ST: [Laughter]. TB: iTunes. The iTunes Store, I guess [laughter]. ST: Yes. Thank you for that Android loving, I appreciate it-, TB: [Laughter]. ST: Deep down, and thank you for putting Play Store first. And most of all, thank you for being on Fintech Insider once again. TB: Thank you, Simon. ST: And thank you for listening. If you like what you heard, please, please subscribe to our podcast. Review us on iTunes. We love reading those reviews. And befriend us on Facebook. Why not? We're friendly folks. And you can find us on Twitter, as well. That's all for now. Thank you. END OF INTERVIEW 00:42:29