You can’t go a week in the UK tech scene without hearing about the fierce battle between the challenger digital-only banks, Monzo and Revolut.
Both started around the same time, both have unicorn valuations, both are seen as the leading alternatives to the big incumbent banks.
However, for a while I’ve held the opinion that these two companies are operating with jaw-droppingly divergent strategies, despite the media lumping them both into the same pot.
However, there was no publicly available data that proved or disproved my theory until this week.
Here are (in my opinion) the important facts:
- Revolut isn’t a bank. Their customers use prepaid debit cards, and Revolut operates under an e-money licence rather than being a registered bank. Most of the Revolut customers I know use it for travel, due to the excellent FX features.
- Monzo is a registered bank, where their customers have Visa Debit cards that are linked to Current Accounts. Monzo’s services have a much greater focus on budgeting and spending categorisation.
Revolut, like many other start-ups in the era of fast flowing VC capital, is trying to scale as quickly as possible. They are doing this using the prepaid card model, as its easier and faster for customers to sign up to prepaid cards compared to a Current Accounts. Revolut has already scaled to over 30 countries.
Monzo, on the other hand, has not been growing as fast as Revolut, is still predominantly UK focused, and is concentrated on creating a great daily banking experience.
So what’s the data that came out this week?
- Revolut has 7 million customers with 1.1 million (16%) daily active users, and with £58 million per year in revenue
- Monzo has 3 million customers with 1.7 million (57%) daily active users, and with £9 million per year in revenue
So what was my theory?
Monzo is focused on creating dedicated long-term loyal customers, whereas Revolut is focused on getting as big as possible, as fast as possible.
The difference in daily active users confirms the divergence in strategy.
My bet is one of them will eventually pull ahead of the other due to either 1) a long term customer growth and retention advantage, or 2) more favourable long-term defensible margins. I don’t believe both firms will survive.
One fun part about blogging is being able to make public bets on what will happen, and to look back in the future on what happened.
We’ll see.