Monzo, hailed as one of the best pre-paid currency cards for travellers thanks to its fee-free transactions and overseas cash withdrawals, is poised to introduce charges for the first time.
In a blow to its 400,000 customers, the team behind the bright pink card has been a victim of its own success and says that it needs to find a way to keep its banking approach sustainable.
Monzo, launched in 2015, was built on the ethos of fostering a fairer way of managing money abroad and has become an increasingly common sight in holidaymakers’ wallets. This week it asked its users on how best to introduce charges to ATM withdrawls, which, it suggested were essential to keeping the card provider afloat in the future.
“Today, we’re coming to our community again to ask for your help with a tricky decision,” it said in a blogpost. “Very high foreign transaction fees have always been one of the things we hated about our old banks, and we’re committed to keeping foreign spending free for our users.
The three options offered by Monzo to its customers
- 1 per cent charge for ATM withdrawals in Europe and 2 per cent for the rest of the world
- 1.5 per cent charge for ATM withdrawals everywhere outside the UK
- £200 free allowance per month and 3 per cent charge for withdrawals thereafter everywhere outside the UK
“However, when a Monzo card is used to withdraw cash from an ATM outside of the UK, Monzo pays the ATM owner a substantial fee. That fee varies from around 1 per cent in Europe to just over 2 per cent outside of Europe. We currently absorb the ATM fees ourselves.
“We want to build a sustainable, viable business that is around for many years to come. At the moment, the rising costs of foreign ATM withdrawals makes that difficult.”
Monzo went on to explain the data behind its decision, detailing how its cost per user had risen from £6 to £16 in just over a year. It added that 13 per cent of its customers accounted for more than 85 per cent of its ATM costs, in any given month, as “many of these people signed up to Monzo because of the… fee-free ATM withdrawals abroad”.
Monzo then offered its customer base a decision on how the bank supports itself in the future, with three options - and the opportunity to suggest a fourth.
Mozno was keen to stress it intends to keep paying abroad by card free of charge and pointed out that any eventual fee on ATM transactions will likely remain less than its rivals. It cited Natwest of charging 5.26 per cent on the cost of a withdrawal in an example in Berlin, and First Direct of charging 5 per cent in an example in San Francisco.