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Does a Data Breach Impact Such a Newly-Loved Brand Like Monzo?

By Rebecca Crook, Chief Growth Officer, Somo

Monzo is best known as a neo-bank disrupting the norm, developed for the smartphone generation, and removing the need for physical branches, cheque books and call centres. The entire principal is based around its app with a focus to build the best current account in the world. They have a vision to become an intelligent hub for your entire financial life.

Rebecca Crook

Monzo has gone from strength to strength since its launch in 2015, with more than 2 million customers in the UK – and adding to that, a unicorn value. Recently they have announced a formal expansion into the U.S market. The work began several months ago and will see a U.S Monzo app and Mastercard debit card made available at pop up sign-up events around the country. The initial launch will see just a few thousand card issues with a waiting list in advance of a wider national launch. 

As many UK brands have discovered at their peril, the U.S market is considerably different to the UK, particularly when comparing how Americans and British consumers spend, save and manage their money. Monzo will have to be even more innovative in its product approach and understand the localised nature of the U.S. This is a lot for a reasonably new company to tackle and do successfully. 

Like any crisis, the important factors are how the company handles the communications and what processes they put in place to ensure it doesn’t happen again

With all this going on, perhaps Monzo’s focus has been elsewhere, causing a recent data blip. Almost 500,000 UK account holder were urged to change their PIN numbers following a flaw which meant internal engineers were able to access some of them.

One could argue whether Monzo needed to be that honest about the error, considering no actual bank details were affected and customers’ money was safe. Most large-scale companies tend to wait until the scandal is exposed or wait until they absolutely have to before announcing to the world they’ve messed up. Yet, Monzo being transparent and honest from day one has been pivotal to its success so perhaps it’s no surprise that they made the announcement.

Data breaches are not a new thing and although consumers clearly do not appreciate the threat of such activities many companies have been hit hard with challenges. Trust is a key component for any brand and once that trust is compromised it can be hard to bounce back from. But data and IT problems are not unique to financial services; Uber and British Airways have recently run into its own troubles, with the latter picking up a record £183 million fine this year

I like the fact Monzo were transparent and brave in coming forward about it. This is a trait many corporate brands could learn from

Looking at the impact an IT failure has had with another bank (one you can argue perceives itself as a challenger bank) is TSB. Last year, its botched IT upgrade saw almost 2 million customers under threat from fraudsters. Customers had their accounts accessed by other customers; some customers saw huge account balance increases whereas others saw direct debit payments declined despite the fact they had the funds to pay them. The data breach provided the perfect opportunity for fraudsters to pounce costing TSB £176.4million in customer compensation, fixing the IT system defects and foregone income. 

That’s a lot of money lost for any company, let alone a big bank. However, it is interesting looking at the customer numbers, as the fiasco didn’t impact as poorly as you may have imagined. Around 26,000 customers moved their accounts away from TSB that quarter but around 20,000 new customers opened an account with them or switched their account to TSB. A net loss, but considering the huge press coverage and impact to customers (more than 1,200 customers had money stolen from their accounts and during the time of the incident there was an uplift in cyber-attacks to 70 times the normal figure) it could have been a lot worse for them. It’s too early to know the impact the Monzo data breach will have on customers but if the likes of British Airways and TSB can make monumental mistakes then surely a little bit of slack can be given to Monzo, especially given the love from customers of the brand.

Like any crisis, the important factors are how the company handles the communications and what processes they put in place to ensure it doesn’t happen again. Monzo have worked incredibly hard to be a trusted brand by its customers with a few gimmicks of golden tickets along the way, but all has proved to Monzo’s advantage. Three initiatives they undertook and continue to deliver certainly have played to its benefit in a crisis such as this.

  1. Transparency. Many companies keep system failures or problems out of the public eye, but Monzo have taken the approach from day one to communicate any issues via Twitter and to its customers directly. This is important as every customer wants transparency – something that traditional banks often fail to deliver.
  2. Monzo Labs. Monzo have a strong reputation in listening to its customers using the Lab, which allows existing customers to access new features as well as sharing feedback and ideas. This helps Monzo to not only improve the product but increase brand sentiment with customers feeling a part of the process.
  3. Product Roadmap. A lot of companies keep their product plans quiet but Monzo have embraced consumer feedback publishing its roadmap each quarter and allowing users to vote on both functionality and features, taking designing for the user to the next level.

It’s important to remember that the banking landscape in the UK has changed beyond belief over the past 10 years with our phones becoming our bank, branches becoming obsolete and new entrants like Monzo being the saviours of the sector for many consumers. 

As a Monzo customer myself it hasn’t changed my opinion of them. Do I trust them any less? No. Would it stop me banking with them? No. These things happen. Yes, it’s embarrassing but I like the fact Monzo were transparent and brave in coming forward about it. This is a trait many corporate brands could learn from. I’m just not sure the big four banks in the UK share these values and have that consumer trust that Monzo shares with its customers. 

Customers are getting ever more demanding, and only those bank brands who capture openness, trust and innovative product solutions will be the winners

All banks want a trusted relationship with their customers but following the banking crisis and the general feeling that the big traditional banks put their own interest first (profit before customers, closing branches, reducing staff numbers, charging unproportionate fees and outsourcing call centres ) being open and fair is the biggest impact on trust that banks have. 

The positive and brave move Monzo took in going public with, what in the grand scheme of things is a minor story, demonstrates its refreshing approach to banking and its heartening relationship with customers. I don’t believe for one moment this will impact on Monzo’s customer numbers because they are offering flexible and easier banking solutions which they have designed around its customers. Customers are getting ever more demanding, and only those bank brands who capture openness, trust and innovative product solutions will be the winners. 

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