Monzo Benefits from Rising Rates

Rising rates turn Monzo from a card driven app into a spread business with real banking leverage. Once a customer leaves salary deposits and savings inside Monzo, the company earns more as base rates rise, while still using part of that higher yield to offer attractive savings rates and premium perks. That creates a flywheel where deposits boost revenue, and higher rates also help retention and lower paid acquisition needs.

• Monzo is no longer mostly living on interchange. In 2023, 51% of gross revenue came from interest, split between loans and deposits, versus 27% from subscriptions and 21% from interchange. That means rate moves have a direct effect on revenue mix and profitability.
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• This was a sector wide reset, not just a Monzo story. As rates moved from near zero to about 5%, Monzo, Starling, and N26 all reaccelerated, and Monzo's interest income grew 167% year over year. The winners were the neobanks with enough deposits and balance sheet scale to capture that spread.
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• Compared with peers, Monzo sits between Starling and Revolut. Starling has higher deposits per account, which can make each customer more valuable, while Revolut has broader product breadth. Monzo's edge is the everyday UK current account relationship, which gives it sticky low cost deposits that become more valuable when rates rise.
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The next phase is turning rate helped earnings into durable banking earnings. As Monzo adds more lending, business banking, and paid features on top of a large deposit base, it can keep more revenue even when rates fall, and look more like a full stack retail bank than a thin neobank wrapper.