LONDON — In an indication of the kinds of competition credit unions face when it comes to incentivizing new business, incentives U.K. digital bank Monzo sharply increased spending on customer acquisition over the last year, with payouts tied to referral incentives rising nearly 40%, according to a new report.
The Financial Times reported that Monzo spent 29.5 million pounds ($39.7 million) on its “refer a friend” program during the 12 months ended in March, up significantly from the prior year as the company intensified efforts to attract new customers.
Overall marketing spending also climbed substantially, rising nearly 50% to 143 million pounds ($192 million) over the same period, according to the report.
The Payouts
Under Monzo’s referral program, customers receive between 10 pounds and 50 pounds ($13 to $67) for introducing new users to the platform, with both the existing customer and the new customer receiving incentives. The Financial Times noted that competing digital banking platforms including Revolut and Chase operate similar referral models.
John Cronin, founder of SeaPoint Insights, told the Financial Times the level of spending highlighted how aggressively Monzo is pursuing growth.
“The referral schemes are quite an eye-opener, there’s a huge amount being paid out. They are really paying for their growth — it’s a standard tech playbook,” Cronin told the publication.
The report comes as digital banks continue to navigate questions around long-term customer retention and international expansion.
Pullback in U.S.
Separately, PYMNTS reported that Monzo has pulled back from the U.S. market, arguing the move illustrated the broader challenges digital-only banks face when expanding internationally and converting users into primary banking customers.
According to PYMNTS Intelligence research cited in the reporting, consumers may be willing to try new financial apps, but maintaining those relationships over time is more difficult, particularly when core products such as deposits and lending remain tied to more heavily regulated institutions.
Additional research conducted by PYMNTS Intelligence in partnership with Trustly found digital bank customers show stronger interest in alternatives to traditional payment cards when incentives are available.
The Findings
Among the findings cited:
- 44.6% of digital bank customers said they prefer digital wallets, nearly double the rate seen across the broader banking population.
- More than half of digital bank users — 52.2% — reported annual incomes below $50,000, compared with 30.8% of the broader sample.
- About 72% of surveyed consumers said pay-by-bank services could replace debit cards if rewards programs and buyer protections were offered.
