Monese’s fintech-for-good business model embraces customers that other banks consider ‘high risk’… and it’s thriving. Founder Norris Koppel – himself once one of the ‘excluded’ – explains how it works.
The self-styled ‘Uber of banking’, mobile-only Monese first emerged in 2013. Since then, the challenger, originally built for people who had newly arrived in the UK, has seen around 3,000 customers signing up to its service daily. It currently operates two million accounts and aims to more than double that to five million across Europe by the end of the year.
Driven by the indisputable right of people from every walk of life to have financial freedom anywhere, Monese caters for a broad swathe of the ‘excluded’ – expats living, working, studying and retiring in countries across Europe, refugees claiming residency in the UK, as well as the homeless and marginalised. For around half of them, Monese’s is their primary account, a statistic not many of its fellow challengers can match.
Last June, Monese took the definitive step of giving out its Premium plan for free, for life, to refugees granted UK asylum who had received their Biometric Residence Permit (BRP). It was in response to issues many were experiencing with high street account opening procedures. It followed an earlier trial with the UK Post Office, allowing refugees and others with no registered address, to use their local Post Office as a proxy address so they could open a bank account and pick up their debit card. The problem was particularly acute for refugees granted asylum in the UK, who are given 28 days to secure a job, come off benefits, find a house and open a bank account. According to a survey by the Refugee Council, around half live in temporary accommodation or become homeless in that period.
“We want to help conquer white and blue-collar exclusion, which is still very much a reality,” says Koppel. “This service will support many people, including those travelling [across borders] for work as well as under-served customers without permanent addresses, such as refugees or people living in major cities who don’t have a home. These are examples of how we’re trying to make a positive impact.”
And it’s paying off – on both sides.
Currently in a fundraising round that many believe will propel it towards unicorn status, Monese expects to turn a profit in 2021 – perhaps the best illustration yet that a tech-for-good business model can be made to work. But just as Monese isn’t all about jet-setting Gen Z-ers (although they form a big part of its customer base), it isn’t just about digital, either – as demonstrated by another service tie-up with the Post Office and Paypoint, a similar version of which it plans to roll out with different partners across Europe during 2020.
“Everything is going online and banks are closing branches. But we can’t ignore the fact that there is a large part of the population that still requires cash,” says Koppel.
“As a mostly digital challenger, we have formed partnerships in the UK with a wide network of companies, such as the Post Office and PayPoint. This enables us to provide customers with cash deposit capabilities in 40,000 locations across the UK. Even in rural areas where mainstream banks have closed branches, there is always a Post Office or a little corner shop that supports PayPoint. So, we are able to give customers convenient access to deposit and withdraw all across the UK, and we are now focussing on doing exactly the same across Europe.”
Technically an electronic money institution, any mainstream banking services that Monese cannot offer, it teams up with third parties to provide via the app. Its newest partnership was formed in September last year with Raisin, through which customers can access a range of savings products.
Partner for life?
It’s part of the next stage in Koppel’s quest, as he told the Paris Fintech Forum earlier this year: “We started on a mission
to help new arrivals in a country access financial services. How can we be with them in the long run for other big life moments, and help them solve and overcome their most significant issues and challenges? It’s these solutions that’ll fundamentally change a consumer’s life. They aren’t cosmetic or temporary but, rather, long term. This will determine the future of businesses like ours.”
The immediate focus will be on using alternative ways to analyse data to extend lending to underserved consumers – those who perhaps don’t meet the required identity and credit referencing requirements of mainstream providers.
“I strongly believe that, in future, we’ll be very much focussing on making credit more available and accessible to those who are good customers and good re-payers,” says Koppel. “At the moment, they are excluded from mainstream services just because their data and credit history have not travelled with them.
“All financial services companies and banking providers must be able to identify their customers. They need to make sure that no bad money enters the system, that money is not being laundered and criminal money doesn’t move around. And, of course, the laws are there to protect those who are inside the system. The regulations are actually pretty clear – you are obliged to know about your customers so that you, as a business, are confident that when this person enters the system, they are not going to harm it. So, the way we see it, the system, and the regulations, give companies quite a broad choice. A financial services provider, or a bank, can actually make up its own mind on how exactly to assess the risks.
“But the way banks, historically, have made identity and anti-money laundering checks, is significantly outdated, for example, with address checks. So, when you walk into a typical European or British bank, the first thing they ask you for, apart from your passport, is some sort of utility bill or a bank statement from the same country, in the same language. They can’t handle the utility bill coming from another country or in another language. This is where the system fails. But there are ways around it. Thanks to modern technology and information that lives in the Cloud these days, which surrounds every one of us, it’s actually possible to avoid asking people for these pieces of paper. This is how paytech security can be not only more convenient, but much more logical, too.
“When I moved from Estonia, many years ago, to the UK, I was unable to open a very simple bank account. To me, that was completely bewildering, I just didn’t understand why this was happening. I had a good job, I had a flat, and everything else was going wonderfully in my life, but not being able to open an account left me completely astonished. I actually felt quite humiliated. At the same time, I realised that this problem was deeply affecting hundreds of millions of people who wanted to move to another part of the world because of work, studies or perhaps marriage. So many people were going through the same exact process and obstacles.
“Monese was really built to figure that out, and to eliminate that problem, which I think doesn’t fit in the modern age.”
So, how does Monese intend to tackle inclusion when it comes to lending?
“I know that, right now, many companies in the world are really working on this problem, but no one has quite figured it out yet,” says Koppel. “’What’s missing is a global approach. A global company that is able to pull credit information about people – from all sorts of Cloud, regional and international databases – and make sense of it all. This could support banks with the decision-making process as they consider credit cards and loans.
“We intend to be one of the innovators in this space. We are aiming to make credit available to those who are new to the country in 2020. This is one of our core focusses over the next couple of years.”