UK challenger bank Monzo has experienced a quadrupling of losses over the course of its first full year with a banking licence.

According to the firm’s annual report, released Monday, its overall losses have increased from £7.9 million ($10.39 million) to £33.1 million ($43.53 million). The bank puts the increase down to “an increase in operating costs”.

“Our costs increased by £26.9m to £34.9m in the current year as a result of investment in the banking operations with the company becoming a fully operational bank during the year,” reads the report.

As many challenger banks shift towards more profitable models – usually involving the collection of deposits and savings – and aim to become the primary bank for their users, Monzo has published some sobering figures on user retention.

Customer deposits for the bank amount to £71.2 million ($93.63 million), less than £150 ($197) per account holder when distributed among the bank’s 750,000 current accounts.

On top of this, around 80% of Monzo’s userbase do not deposit their monthly salary into their account, and still use the card for other purposes.

Related: 94% of Monzo customers switch to current accounts following beta

In a review at the head of the report, Tom Blomfield, CEO of Monzo, focused on the growth which the bank has achieved since its founding.

“In September 2017, each active prepaid account cost us £65 a year to run: we paid third parties to process payments and let users add money to their accounts by topping up from another debit card,” he wrote.

“The bank now runs entirely on technology we’ve built from scratch ourselves. As well as letting us respond quickly to changing customer demands, it also costs us less. By February 2018, we were able to run a full account for only £30.

“All in all, that means we’ve reduced the cost to run each active account by almost 80% in just ten months.

“In the next few months we’ll keep improving our unit economics: the money we lose or make on each current account.

“Our goal is to break even on each new customer very soon, then reach overall profitability as a business in the future.”

Monzo plans to generate revenue through lending, with 37,000 people have already enabled overdrafts on their accounts. It lent £112,000 ($147,000) in early trials prior to February 2018.

The bank also aims to hit the 1 million customer milestone in September or October 2018.

by Alex Hamilton
Alex is Senior Reporter at IBS Intelligence, follow him on Twitter or contact him at: alexanderh@ibsintelligence.com
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