UK-based digital-only bank Monzo has launched its latest product. Monzo Investments will be available to the bank’s majority Generation Z customer base. With Gen Z the least likely generation to hold investment products, Monzo’s low-barrier solution can help spur investment interest among this group.
According to GlobalData’s 2023 Financial Services Consumer Survey, 52% of Monzo’s customers belong to Generation Z (<27 years old) and two thirds are under 30 years old. These customers are less likely to hold investment products. Only 23% of Generation Z and 29% of millennials are investors. These proportions are significantly lower than older generations.
Monzo Investments can help its young customers take their first steps into investing. The neobank allows investors to start with as little as a £1 ($1.23) investment and allows users to select between three different funds with varying levels of risk. Monzo also provides customers with educational articles to help them better understand investing.
The combination of these two features is a smart move by Monzo. According to GlobalData’s 2023 Financial Services Consumer Survey 26% of 18–34-year-olds do not hold investments because they believe they do not have enough savings to make it worthwhile, while a further 25% do not know how to invest. The low barrier to entry combined with educational articles should help more young people start building their investment portfolio.
Monzo Investments represents a new revenue stream
This product also introduces a new revenue stream for Monzo. The bank became profitable for the first time in February 2023, spurred by a 382% year-on-year increase in its net interest income and a bumper year for its lending services. The cost-of-living crisis undoubtedly helped Monzo in this regard, with consumers making more use of overdrafts, loans, and Monzo’s buy now pay later service, Monzo Flex.
As inflation starts cooling down, so will the income generated by Monzo’s lending services. Onboarding customers to its investment product is therefore a key goal for the bank, so it can continue to increase its revenue without the default risk accompanied by unsecured lending.
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By coupling investment services with education, Monzo will raise the number of young investors in the UK, increase customer stickiness, and establish a new, less risky income stream to help improve its profitability going forward.
Yasha Kuruvilla is a banking analyst at GlobalData