Monzo

This "off the record" podcast is available only to the avra community and please treat this as confidential.
TS candidly walks through his journey helping Monzo rediscover its mojo after COVID-19 and scale to $1B+ of Revenue

Takeaways‍

(20 minutes)

Monzo Overview

• Monzo is a mission oriented digital bank, with the goal of making money work for everyone
• The platform is intended to be a single financial control center, where a person can meet all of their money needs
• Customers are given the information and insights to make good choices - Mint, Venmo, and Banking all-in-one

From launch to >$1B in Revenue Run-Rate 

2017: Banking License

• Monzo received its banking license from UK regulators 
• Monzo mostly grew organically and was known for its simple to use UI/UX and hot coral debit card

2020: COVID-19 and TS Anil joins Monzo

• 3M-4M customers with mostly organic growth and 70+ NPS. $50M-$100M of Revenue
• Monetization began to lag and shipping velocity slowed down as regulatory oversight expanded
• Everything changed with COVID-19. Revenue declined 40%-50% and regulators demanded more capital
• TS Anil became CEO to help Monzo recover and scale out of the Pandemic driven headwinds

2024: 10M customers, $1B+ Run-Rate, 4%-5% m/m growth, and profitable

• 10M customers. Crossed $1B Revenue Run Rate in January and still growing 4%-5% m/m
• Cash Flow positive, but raised capital at a valuation of $5B to pursue new investments

We were a few weeks from dying in 2020

• When COVID-19 hit, Revenue declined 40%-50% and regulators demanded more regulatory capital
• As a banking provider for 3-4 million UK citizens, the regulators were worried that Monzo would not survive
• When TS joined in Q1 2020, he went into “war-time” to put together a plan to raise capital and get back to building

What was working when TS joined?

The product

• Monzo was 3.5 years old and they had found magical product market fit. NPS was >70 even during COVID
• Customers loved that Monzo gave them a real time sense of what was going on with the account, spend notifications, an account feed, and features like savings pots to compartmentalize their money

Strong brand

• Customers loved Monzo’s brand and Mission to “Make Money Work for Everyone”
• Monzo’s mission was not just a platitude but it was ingrained in the way they built product and spoke to customers
• As an example, they standardized and published their tone of voice, which emphasizes speaking to customers in normal English unlike other banks who spoke down to consumers or used jargon/complex terms

TS on why customers loved Monzo’s brand

“The brand was second to none..it was how we spoke to customers against the backdrop of the incumbent industry that talked down to customers, presenting the T’s and C’s, terms and conditions, as opposed to helping them understand the product”

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Fully in-house tech stack in an old-fashioned industry

• Monzo spent time and capital on building their own tech stack from the ground up. This is unique in the fintech and greater banking space where organizations typically build their stack by connecting third party software providers and internal systems
• Owning the full infrastructure (e.g., ledger, payment systems, etc) lets Monzo build unique products for Monzo customers, which is scalable, and cost effective (a few pounds/customer/year)

What was broken when TS joined?

Investor confidence

• In 2020 they had a massive loss of investor confidence which was driven by 1) high burn, 2) lack of revenue growth overshadowing positive progress on customer acquisition, and 3) panic generated by Covid-19
• As a result, Monzo’s funding round fell apart leaving them with just a few weeks of cash runway

TS on investor confidence

“They believed we wouldn’t deliver anything other than growth on customers and cost because everything from a revenue perspective, and everything else was lagging massively…we had weeks of capital runway at the time”

Regulatory controls

• They were a fully regulated bank without the controls necessary to be a fully regulated bank. Typically, as a company grows they accumulate product and tech debt. For Monzo, operating in the banking space, they accumulated controls and regulatory debt
• The lack of controls undermined regulators' confidence that Monzo was safe to keep running. Regulators were concerned to a point that they might take action to protect consumers, becoming an existential threat to Monzo

TS on the lack of regulatory controls

“They had not put in the controls that were commensurate with the size of the company we already were. We were about 3 million customers at the time but our controls had not kept pace [with user growth].  Financial crimes controls, credit risk resilience controls, etc that would give regulators comfort [were not in place or robust enough]”

Leadership team 

• The original leadership team had not scaled - they did well in the early days but were not positioned to run a bank
• There were pockets of the team that became toxic and were not helpful to have around during an intense period
• After Tom transitioned the CEO role to TS, TS began to slowly rebuild the team to work for Monzo’s current scale

Lost their mojo as a company

• The company had stopped moving forward and progress was slowing - wins were no longer compounding
• Shipping velocity dramatically slowed down in the 12-18 months leading up to 2020
• Monzo’s best talent left. This was exacerbated by COVID-19 when they had to layoff a portion of the teamsome text
  • UK layoffs are painful - if you want to layoff 10% of the team, you need to put everyone on notice first
  • Monzo lost more employees than intended from the layoffs, with key talent leaving after receiving the notice

TS on losing key talent

“Effectively it was a process that let’s say you need to lay off 10% of your engineers, you put the entire engineering team on notice saying that we are going to layoff. It's a consultation process that determines which 10% you are going to let go. Which effectively meant there was an exodus from our key talent”

Anu on the layoffs at Monzo

“The layoffs TS talked about, we lost close to 50% of the engineering team, while the original intention was to only lay off 10%. And the employee NPS dropped well into the low 20s.”

Covid-19 Shock

• Revenue fell by 40%-50% because people were in their homes and not spending
• Increased regulatory scrutiny as Monzo dealt with the economic shock of Covid
• Covid took away the culture of camaraderie at a young company and replaced it with isolating lockdowns

TS’s First 100 Days

TS faced a barrage of responsibility stepping into the role 

• It was a hair on fire environment where people were aggressively looking towards leadership for answers
• He likened it to being surrounded by spears - TS had to deal with many stakeholders all with different incentives
• Investors, regulators, the leadership team, the media, employees, and others were looking to TS for guidance

TS’s metaphor on coming into Monzo

“The visual metaphor, in my mind, is like a scene from Game of Thrones, where this person is in the middle of a clearing in the woods. And there's five people standing around them with spears, pointing at them, like everybody wants a piece of me. So it was very hard. And I also realized very quickly that everybody wanted a different piece of me, everybody, all of these different stakeholders, investors and regulators, and, you know, the media even. And the team all wanted a different piece of me.”

Nothing in his background pointed to him being right for the role

• At the time, investors brought on TS because they wanted a strong leader to triage the situation and land the plane. TS viewed himself this way too – as a conservative and safe pair of hands. Not someone to 10x Monzo
• While TS’s profile emphasized safety, his background was not typical for a high growth start up
• TS recognized this and his approach was to act authentically and not try to be a leader/CEO he wasn’t

TS on his profile vs. the ideal profile

“The deeply personal part of this was that nothing about my biography would have read as the person to back because the best version of me would be described as a safe pair of hands. And while a safe pair of hands is necessary in some situations, a safe pair of hands isn't what investors invest in. They invested in someone that is going to scale the company not land a plane”

‍TS on staying true to yourself

“I just figured I was going to just do me, be the version of me that was the most authentic version, and then roll with it”

Building the 100 day priorities

• Everyone was asking for different things, the superset of the asks was hard to grapple with
• It became clear that the priorities were intertwined and unlocking one required unlocking others
• He built a plan which broke down goals into 3 areas: 1) raising capital, 2) shipping product, and 3) fixing controls
• To raise capital and grow again, TS needed to address each of these goals in parallel vs. sequentially

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TS on the interconnectivity of each goal

“In our case, they compounded also, because of the dependencies between things. So if I got room from the regulator, it allowed me to ship more, it allowed me to grow more, and it allowed me to raise capital. So they were all linked anyway and they compounded”

TS’s Priorities

Priority 1: Raising more capital

• The primary focus was raising more capital, which required him to give investors the belief they were back on track
• To do this, they had to ship product and show that they could launch products that customers would use 

Priority 2: Shipping products

• TS’s goal was to ship a subscription product and a business banking product by the end of March. In four weeks, built the v1 of both products
• To launch them, they needed regulatory approval, which required Monzo to address control problems

Priority 3: Regulatory controls

• They needed to fix controls to gain the trust of the regulators and to start launching and scaling again
• He pushed the team to “own control debt” versus rolling their eyes at it and get frustrated by regulatory asks

Getting the engine started again

TS’s framework for trust

• TS had to evaluate who he could rely on in the organization quickly. He evaluates trust across three vectors:

Sincerity

• Sincerity refers to the constitution of an individual's character. Certifying that they are a moral actor who will not betray your interests

Competency

• Trusting someone is also a function of if they are capable of fulfilling their commitment. There is trust embedded in the faith that someone can correctly complete a given task

Reliability

• Reliability is about whether the person will follow through on their commitments

TS on the different factors leading into trust

“Does this person telling me the truth that they have my best interests at heart? Are they doing the right thing? Sincerity. That's the easiest one to understand. The second is competence. So someone can be extremely sincere and truthful, and everything else, but they just are not competent for the job that they're being asked to do. So that's a different kind of trust. Like I don't trust this carpenter, not because he's gonna steal from me, but I don't trust that he will build what we asked him to build. So that's competence. And the third is reliability. The person can be sincere, they can be competent, but they just won't follow through. ”

‍The leadership team failed the trust framework

• Every leader in the executive suite was missing either sincerity, competency, or reliability
• This created challenges coming into the role where he couldn’t trust his own leaders
• He couldn’t replace everyone at once - so he had to prioritize phasing of leadership changes 

TS on his leadership team lacking attributes of trust

“On my leadership team, there were people that all of these were checked off in terms of not meeting that there was someone who was breaching sincerity with me. There was someone breaching competence because they were just not in the right role for them. And then there was some extremely competent, very truthful, everything great, but just not reliable. They were like phoning it in. So all of that had to be contended with ”

‍In the interim, TS leaned on his core group of high trust individuals

Leaning on foundational talent

• There was a set of OG Monzonauts who were there from the beginning and were committed to making it work
• TS leaned on these people where possible to drive forward initiatives and key projects within the company

Identifying other strong leaders and sharing the burden

• Three weeks after TS took over, a new COO joined Monzo. She was chosen by his predecessor
• Having another strong leader in the mix to rely on is critical in making the objectives more manageable
• They operated a divide and conquer strategy - which let them focus on areas where they were strong

TS on the value of finding a reliable partner

“The other thing that helped massively was finding a partner, someone that you can rely on. Our chief operating officer had started three weeks after I took over. She was hired by my predecessor. She hadn't chosen me and I hadn't chosen her. Life played itself out, and we found each other. Having someone that you can rely on that you can divide and conquer with was massive to getting things done. ”

‍Align the team by emphasizing the customer as the north star

• Remembering the purpose of doing right by the customer, and the responsibility of a financial institution to its customers was a helpful perspective. TS would emphasize this framing with the team consistently to drive more alignment within the team

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‍TS on having a customer focused mission

“Ultimately, a true north was doing right by customers. And at a time when COVID was happening knowing that customers are going through a hardship just throwing ourselves towards that was a good Northstar. [Emphasizing] that we want to build the right thing, we want to ship the right product, we want to invest in the product to continue that journey towards our mission. That was a good true north that made it feel bigger than just us and bigger than Monzo.”

‍Wins compound and build momentum

• TS emphasized highlighting wins to employees and external stakeholders regardless of size
• This helped created an an emerging pattern that the team is delivering on their goals and promises
• As you consistently deliver wins, trust in the organization is reestablished. In TS’s experience, this compounds
• The feeling of winning brings back the mojo of employees and people feel like they can be even more productive 

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‍TS on compounding trust

“Those wins compound in such interesting ways. There's the compounding of trust. So if you earn that trust, then you can get more time to do the next thing and the next thing and those things become bigger and bigger. The compounding of the wins becomes such a crucial thing to capturing the spirit and the mojo and the can-do attitude comes back because you've actually accomplished something”

‍Keep yourself sane. Build an external community to support you

• TS maintains a group of individuals composed of family, friends, and business peers outside of the company that he refers to as his ‘village’. The purpose of this external group is to give TS insights, act as a sounding board, and provide emotional support
• The support lended by this group is critical because as a leader he needs to maintain stability and emotional integrity
  • TS described this emotional support as providing him with energy

TS on building a community

“The fourth piece for me was building the village, So people that would give me energy, which was not necessary, sometimes inside the company, sometimes outside the company, people that would give me insights and be a sounding board for me. People that would keep me sane. And that was a really crucial part of it because the dependency on the key person becomes so high at times like this, that if you're not able to hold it together, then it all falls apart. ”

Building trust in a short period of time 

Building trust…across the pond

Building trust through social engagement 

• TS would engage in zoom social hours where he would drink with other team members. It functioned as the mechanism to get to know team members that would typically occur through informal channels like hallway conversations and after work beers

TS on socializing while remote

“And building trust with key team members meant everything, I would do this 2pm Whiskey 2pm UK time 10pm London, have a whiskey with someone because that's the only way for us to have any kind of informal conversation, any version of hallway conversation or let's go out and get a beer after work. That was done in this really stilted sort of setting because it was all in zoom.”

‍Building trust by example

• Breaking down the covid barrier was a critical way to get the organization moving again
• Visibly showing the organization that there was leadership present, and was actively engaging, was important
• TS, who was living in the US, achieved this by traveling to London and working in person (safely) with the team

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‍TS on building camaraderie with the team

“There was this window that opened up during the lockdowns where you could meet outdoors. So I would literally sit with a laptop and one of those little roving wireless modems and sit with them in a park. I think putting yourself out there from a belief and a conviction perspective helps massively. ”

‍Triangulating truth…across the pond

• Not physically being with the team was a disadvantage as TS was not sure who he could trust as reliable
• He also didn’t have much context on the business given he started only in March 2020
• To solve for this, he implemented a strategy of triangulation, to be well informed. TS would speak to multiple team members at different levels and pull his own data
• If he was making a decision on credit, he wouldn’t just talk to the credit team, he would also to the risk and data team team and come to his own conclusions

TS on mechanisms for building conviction on information

“Who not to trust, I go to different people to build my own intuition of what is happening. I need to build trust with the key team members, and triangulate that by speaking across levels. As an example, if we had to make a big decision on credit, I wouldn't just talk to the risk team, or the team that was closest to the school phase. I would actually talk to someone else in the data team, who would give me the data that would allow me to build my intuition base. ”

Turning regulations from existential risk to a moat

Rebuilding the trust of the regulator

• As Monzo scaled, they lost the regulators' trust, which limited how fast they could grow and the products they could launch. Unlocking the trust of the regulator was a key priority as a means to give them more latitude
• TS was a more traditional personality who was more similar to the regulators than most early stage founders
• TS earned trust by 1) engaging earnestly, 2) creating a pattern of wins, and 3) embedding controls in Monzo’s ethos

‍Engaging earnestly with regulators

• There were real, substantive concerns that regulators had that TS needed to address 
• TS entered the conversation with an earnest willingness to work with regulators
• This helped build trust and gave regulators the impression that they are being taken seriously and are heard

TS on leaning in to regulatory work

“I was having a straight up conversation with them. Effectively, no, I don't think this is a necessary evil, roll my eyes, I understand that this is existential to us. I understand that we need to get better, it won't happen overnight. But you have my commitment that we're going to take it seriously. And we're going to get it done.” 

‍Building trust with regulators by creating a pattern of wins

• He acknowledged that the regulatory element was a critical part of the business
• He presented a structure to win regulators trust with small wins at periodic intervals
• He would set short-term goals and ask regulators to hold him to them - this would build trust over time

TS on short term goal setting

“Here's the plan. Here are the five things I'm looking to do in the next three weeks. Hold me to that. And I'll come back with what we're going to do in the three weeks after that.” 

‍Building regulatory control into the ethos of Monzo

• TS created a culture where the perceived boring parts of the business were accepted as critical aspects of the business. He conveyed that compliance is of equal importance to the technology side of Monzo if they want to be an important company
• For example, even though Amazon is a technology business, they needed to get the operations and real estate side of the business right for the business to work. If they didn’t focus on it, they would fail as a company

 
‍TS on embracing every aspect of a business

“I would tell the people in the company that if we were running Amazon, and we sat around, looking at each other looking miserable, and saying, Oh, my God, I hate warehouse logistics. I hate the supply chain, then we should be fired. Because if you want to succeed at scale, those are the things you have to be great at. It may not be how you define yourself, but you just have to own it and do it. So the regulatory front was that for us.” 

Regulatory controls are now a moat for Monzo

• Navigating the gauntlet of regulators is difficult as an entrant to the industry
• Once established, it functions as a moat because it requires years of effort to replicate

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‍TS on the regulatory moat

“If you do get good at it, it becomes a moat because it's not for the faint of heart. The regulatory overlay in the banking industry creates a barrier to entry, which is why it still has not been transformed through software in the way so many other service sector industries have been”

TS replaced 8/10 leaders in 18 months

• TS has had to completely rebuild the executive team at Monzo. Over 18 months, he replaced 8/10 executives
• While he ultimately intended on replacing most of the team, there was a fragile dynamic of working with the existing leadership and concurrently phasing out individuals over time
• He stack ranked based on priorities and made replacements over an 18 month period versus all at once 

‍TS on strategically planning leadership shifts

“It would have been ideal if I could blow it all up, and then build it for six months, and then start to execute. But that was not the luxury I had at the time. Rather, we will move on this person quickly, and replace this role. That one, let's wait six months, that one will be 12 months, because I just don't have the luxury of doing it altogether. ”

Maintaining customer centricity at 10M customers

Make all business decisions with the customer in mind

• Monzo constantly has to consider tradeoffs when introducing new products or making changes
• For example, there was a tension between customer satisfaction and availability of unused credit lines
• In Covid, they faced high levels of credit risk for unused balances. Monzo was facing pressure to reduce or cancel all unutilized limits. Instead of making this blanket decision, Monzo took a customer first approach. Monzo looked at all customers and adjusted limits based on data and needs

TS handling customer decisions deftly

“There was pressure on us to cancel all unutilized limits. We went about it scientifically, and we said we will not put a sledgehammer to this. We're going to do it with a scalpel and segmented unused limits. ”

Building a “always on” user research function

• The backdrop of Monzo’s ethos is that they have always built products, with user research in mind

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‍TS on the culture of customers focus

“The backdrop of our ethos, which is super important, is that we've always built products, with user research in mind. And the community that we have of Monzo customers in mind.”

How does the user research team function?

• 25 member user research team which sits inside of the design team
• This is an intuitive place for the user research team because design builds on top of customer intuition
• User research team studies customer usage via calls, videos, and data - not just surveys

TS on how they perform user research

“There's always ongoing user research and seeing how people are using the app, what's resonating, what's not, what's the real insight? Financial services can be a difficult product. It's harder than food delivery or something else. It's a complicated set of products, it's high emotion, it's very high anxiety. So how people process information learning and listening to that. So I look at user research videos all the time.”

How not to perform customer research?

• Monzo doesn’t send out thousands of surveys and generate data across a large customer sample
• Their approach is more intimate, quietly observing user behavior through feature usage and feedback/listening

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‍TS on how not to do user research

“I would describe the ways in which we don't do user research. We don't send out thousands of surveys and see who responds and then say 42% said this. User research is constantly listening, constantly figuring out how people are using the product” 

What data points does Monzo look at?

• Monzo emphasizes usage data when evaluating products/features. It informs what features are easy or difficult
  • Ex. Usage, weekly transacting, purchase types, feature adoption

‍Create other mechanisms for collecting feedback

Community blog

• 10,000+ users engage on Monzo’s community blog
• Consumers provide feedback and discuss products with each other
• It acts as a great source of raw data, which TS tries to check regularly 
• Product managers and executives are all required to respond to their relevant posts/sub areas

TS on the community blog

“So our community blog, It's fabulous, we have tens of thousands of customers, who are constantly engaging with us on the product, constantly giving us feedback telling us this piece, this feature ship, it should work better, right? And saying, Oh, we love the fact that you've launched savings, I'm going to move my savings to Monzo. I access all of that as often as I possibly can”

‍Elevating customer complaints

• Customer complaints are sent to a catch all customer complaint inbox and then further elevated through email to execs including TS. This channel provides TS with direct anecdotes of customers facing issues with Monzo

TS on customer complaints

“I get all sorts of customer complaints that escalate to me. On any given day, you can imagine how many customers are emailing me. I read each one of those emails that we have forwarded to an escalations email for customer complaints and that gets escalated to me and to the other execs. So we have a sense of what's going wrong”

‍Brand and Product saved Monzo

Earn the customers respect by putting them first

• During bank collapses in 2023, there was a general concern from consumers that banks would collapse
• Monzo sought to neutralize the risk of bank run, as much as possible, by focusing on the customer
• Typically, bank runs occur when people believe they can’t get their money out of banks
• By making the UI/UX frictionless for withdrawing money from a users account, Monzo reduced any panic

‍TS on reducing UX friction

“you've seen bank failures now, as well. You can imagine what that meant to us. How do we manage through that? We needed to make sure that nobody had a problem getting their money. You don't want friction to happen if someone is trying to move their money out, because if they sense friction, that creates panic.”[and consequently a bank run]

‍Building trust through your brand

• It was critical to not show weakness publicly when people were raising concerns and complaints about Monzo
• Sticking through the storm and still maintaining a social media presence ultimately built trust

TS on withstanding public criticism

“If you give up when people are complaining, that's the surest way to lose trust. Because at that point, they're like, What the hell? The first sign of trouble is when you get up and take your toys away. But if you stick through that and say, okay, we're learning from that we're responding to that. It actually perversely has enormous leverage building trust.”

Leading through adversity

Maintaining your ability to lead amongst volatility

• Before leading others, leaders need to be able to lead themselves
• Maintaining yourself as a leader includes consistently being in the right emotional state
• TS aims to shrink his amplitude when dealing with stress so that he can better serve the business
• Consistently provide energy and strength to the rest of the stakeholders in the business

TS on having energy as a leader

“You are constantly the person that needs to give energy to people around you. Energy and conviction to an investor, board member, regulator, your leadership team, to the media, to your customer, their job definition is to be able to give it and give it on demand. ”

‍Maintaining a long term perspective

• Leaders need to elevate themselves above the present crisis and think over a longer term horizon
• By doing this, leaders can more appropriately measure their responses to temporary/short-term crises 

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‍TS on long term perspective

“Recognize that the storms will pass and once they pass, you still have a plane to fly. Everybody else is going to be inside a micro mode of the crisis, just dealing with what's right in front of them. Leaders need to lift themselves above that, see through the storms and look beyond. Playing the long game is crucial. If you've killed everything in the process of navigating the storm, you have nothing to fly”

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‍Create mechanisms to handling stress

• TS employs a strategy where he creates stories that maintain a positive attitude+motivation
• TS believes there are two types
• Telling yourself stories to maintain a positive attitude is mechanism to get through life
  • Type 1 fun: when you are having fun in the moment
  • Type 2 fun: when you are having fun in hindsight
• In type 2, even though living through the moment was miserable, thinking back on it, it was a great and perhaps humorous experience. He tries to frame stories in ways that motivate and drive the team to do more

TS about creating stories

“It's really about the stories we tell ourselves. This concept, which has always been a thing for me, which is type one fun versus type two fun, right? Type one fun is when you're having fun in the moment, right? Which is great. type two fun, is something that happens where you have fun in hindsight about it. It's like that camping trip, which went really bad, there’s water in your tent and food, they will run out of food and the fuel and everything else. It's terrible in the moment, right? But when your at the end of that camping trip it's such an amazing story. ”

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