Banking News

Monzo to enter UK business banking fray

(26 November 2018 – United Kingdom) British digital bank Monzo has announced it will target small businesses with a new business banking offering.

Unlike traditional branch based incumbents, the bank plans to deploy £775 million in funding allocated to increase competition in the United Kingdom (UK) business banking market. The group has 800,000 active retail customers using its distinctive pink debit card and plans to release its new business banking product in 2019. The announcement follows Lloyds and RBS damaging claims that they exploited SMEs during the 2008 GFC. The “remedies package” is being made available by RBS to satisfy an EU condition of the lender’s bailout during the financial crisis and is designed to boost competition in business banking. RBS had originally planned to hive off hundreds of its branches into a standalone challenger bank called Williams & Glyn, although the plan proved unworkable due to concerns over the new lender’s sustainability.

Monzo is applying for a grant of up to £50m from the remedies package well as a share of funds that have been set aside to entice customers to switch from existing providers. London-based fintechs such as Monzo and Revolut have raised millions of pounds from investors to disrupt traditional banking although they have yet to become profitable. Monzo CEO Tom Blomfield stated that Monzo planned to provide a superior service to small and medium-sized enterprises (SMEs) that had been “mistreated” by larger lenders

In Monzo's view business account offerings from traditional banks were “riddled with confusing fees” and “hard to access without a good credit history”. Mr Blomfield said Monzo hoped to launch a business account that integrated with payroll systems and accounting software, which would be aimed at digital businesses with relatively lower cash receivables. “Any business that is newly incorporated has no credit history. Banks that refused to open accounts for this reason are acting as a brake on entrepreneurs” said Mr Blomfield.