Can Monzo avoid the failures that brought down Xinja?
Founded in 2017, Xinja was an Australian digital bank that, due to complications caused by the COVID-19 pandemic, struggled to secure enough funding to survive and eventually exited the sector in December 2020.
Katherine Long, Banking Analyst at GlobalData, states that the bank’s offering above-market deposit rates and not deploying them back as loans was a primary issue, although she also highlighted a lack of focus on revenue-generating activities as particularly problematic:
“Xinja did not prioritise early on trying to create a sustainable future with revenue-generating products, and it was too late when it finally dawned that it needed personal loans and wealth services instead.”
Fighting against unprofitability
Despite taking a leading position in the UK digital-only banking market, Monzo, according to GlobalData, is incurring annual losses of £100m. This is despite managing to raise US$717m in capital to create a new range of products and fuel a potential US expansion.
“By creating a leading current account product that generates practically no revenue, either from merchant or marketplace fees, its business has become an increasingly expensive charitable cause for the UK market,” adds Long.
Current attempts to restrict features on the free account and therefore incentivise the use of Monzo’s premium offerings could be misguided: UK customers show little willingness to pay for banking services in the current economic climate, and US customers legally cannot be charged.
Tom Blomfield exits the company
The founder of Monzo, Tom Blomfield, recently on the grounds of mental health. Fuelled by pandemic-related pressures and a dislike of being at the helm of a company that quickly accelerated past its “scrappy startup” origins in only five years, Blomfield’s exit will make Monzo’s future even more uncertain.
Long concludes that the bank should avoid “trying to sell what was once free” and refocus on its ability to attract and engage its customers. Future development around loans and wealth services to maximise revenue could solve its underlying profitability problems.
“The bank should also learn from the likes of in the US, a company that has given low-income customers the tools to help them manage their money easier on conditions such as using their cards or receiving their monthly pay.”
Image credit: Monzo
Upgrade launch new credit card with bitcoin rewards
Upgrade, a fintech company focused on providing credit for mainstream consumers, has launched the Upgrade Bitcoin Rewards Card a new version of its Upgrade Card featuring bitcoin rewards. Under the new programme, users earn unlimited 1.5% bitcoin rewards on every purchase as they make payments.
The custody and trading platform for holding and selling bitcoin is provided by NYDIG and the card is a Visa Signature card, which includes benefits such as trip and baggage insurance, purchase protection, and extended warranty coverage.
The company offers credit lines from $500 to $25,000 with the Upgrade Bitcoin Rewards Card depending on your credit score. It works with Apple Pay and Google Pay. Like other Upgrade credit cards, there are no monthly fees, late fees, or returned payment fees.
"Upgrade Card is already delivering over $3 billion in annualised credit to consumers," said Renaud Laplanche, co-founder and CEO at Upgrade. "Starting today, anyone can apply for an Upgrade Bitcoin Rewards Card and enjoy the same affordable and responsible credit as with any Upgrade Card, plus the potential upside and fun of owning bitcoin."
Participating in the crypto economy
Upgrade isn’t the first company to announce a credit card with bitcoin rewards, but it’s the first one that is generally available. Anyone can apply with no waitlist, and start using their virtual card immediately until they get their physical card in the mail.
"Crypto rewards introduce cardholders to a new asset class that is increasingly part of a consumer's financial portfolio," said Terry Angelos, SVP and Global Head of Fintech at Visa. "Whether you're a crypto enthusiast or just getting started, programmes like the Upgrade Bitcoin Rewards Card offer an engaging and low-risk way to participate in the crypto economy."
At the moment, you can’t do much with your bitcoins. You can choose to hold them or sell them. There’s no way to transfer your bitcoins to another wallet for instance. If you choose to sell your rewards, there’s a 1.5% transaction fee.
This card is not currently available in all 50 states. Customers in Hawaii, Indiana, Iowa, Louisiana, Nebraska, Nevada, New Hampshire, North Carolina, Washington, West Virginia, Wisconsin, and the District of Columbia can’t order an Upgrade Bitcoin Rewards Card at the moment.