Challenger bank Monzo disabled a range of features recently as a result of declined card payments and transactions. The company originally posted: “One of our suppliers is experiencing problems which may cause declined payments when you try to use your card.” Shortly after, it announced that top-ups and Monzo-to-Monzo payments were not running either, prompting it to temporarily deactivate features. In late October Monzo was still facing similar challenges.

According to its status page, “the app may show the payment as successful even though it was not, and the amount may appear to have been deducted from your balance. This is a display error – your balance ‘behind the scenes’ has not been debited.”

The app and features went back up after a few hours, with the issue lying on the processor’s side. Global Processing Services’ (GPS) transaction processing platform powers the company’s solution, and it is not the first time Monzo services have been put on hold because of it. The GPS service bridges the gap between the Mastercard network with the start-up, facilitating transactions for customers.

At the beginning of March, Loot, Revolut, Curve and Monzo all went down due to an issue with the processor, as reported by Business Insider. IBS contacted the supplier, who declared that the recent incident was not related to the one in March.

Challenging times

In its statement, which only refers to the incident as a “technical issue”, Suresh Vaghjiani, managing director at GPS, states: “The immediate priority was to solve the issue and communicate directly and regularly with affected clients to support their ability to provide updates to their affected customers. The issue is now resolved and we are analysing the root cause to prevent reoccurrence.”

Monzo has been planning to build its own in-house payment processor platform to support its current accounts. A spokesman did not comment on what will happen to its partnership with
GPS. Regarding the system selection, Monzo told IBS that pre-paid cards, which is Monzo’s only service, were an experiment and stepping stone to launching a full mobile bank. GPS was chosen with that in mind, knowing that relying solely on its service would be temporary.

IBS talked with some key players about the incident. Curve, a financial management app and card that uses the same supplier and was similarly affected, stated that despite the events, they are still happy with the service provided by GPS. The spokesman said these are expected bumps in any partnership, and in this particular case, it has been exaggerated. He said some other big banks have suffered similar downtime for more nefarious reasons, but they have barely made the news. He said the tolerance for neo banks is zero, as all eyes are on them to change the industry. This scrutiny, plus a community involved in a conversation with these fintechs, puts Monzo’s profile to the top of the news.

However, an HSBC executive said that bigger banks like these can’t afford outages of this type, as they process daily more money than Monzo stores across all its accounts.

The bigger picture

Monzo has nearly reached 250,000 users, according to its annual report. Despite this, the firm has revealed pre-tax losses of £7.9 million over the last year. It has been speculated that the growth in the customer base may have been too much for the company, which is seeing a 5% growth on a week-by-week basis. By the end of the year, predictions set the number of customers at over half a million. However, Monzo’s spokesman told IBS that these losses were predicted and that the company is unfazed. This is why it is still raising money regularly.

Monzo will turn its prepaid card to current accounts later this year. Previously expected at the end of the summer, IBS gathered from the most recent conversation that this may be delayed a few months. The customers must agree to this procedure, but eventually all pre-paid cards will be discontinued.

The launch of current accounts, which will come with a loan rollout eventually, is expected to reverse the financial trend of the company in the long run. The spokesman said this may take some time, but the firm has faith in its model and plans.

This article first appeared in the October edition of the IBS Journal

by Henry Vilar
Henry is Junior Reporter at IBS Intelligence, follow him on Twitter or contact him at: