Monzo/Starling Banking/Revolut

Dirk Diggler · 13 May 2022 at 12:51

englishpremier said:
What makes you think this?

Like I say, gut feel. It feels like there's a 2008-esque financial crash looming and these banks have no real depth to draw on.

I'm no expert, it's just pure spidey sense.

mid_gen · 13 May 2022 at 12:57

Dirk Diggler said:
Like I say, gut feel. It feels like there's a 2008-esque financial crash looming and these banks have no real depth to draw on.

I'm no expert, it's just pure spidey sense.

What are they exposed to exactly? It's not like they're laden down with dodgy debt. They're more service providers than traditional high street banks, starling don't offer loans or mortgages, and seem very reluctant to even allow overdrafts

tlrBeta · 13 May 2022 at 13:41

mid_gen said:
What are they exposed to exactly? It's not like they're laden down with dodgy debt. They're more service providers than traditional high street banks, starling don't offer loans or mortgages, and seem very reluctant to even allow overdrafts

Well Revolut aren't a bank for a start, they likely won't be concerned given their massive expansion into all things money and recent investments.

Starling - They make a lot of money on interchange, less spending = less revenue? That could be their concern. Not certain how much the marketplace really adds to their revenue stream

Monzo do lend money, so they have other revenues + interchange, but again overall retail exposure on less spending might be a concern

Robert · 23 May 2022 at 11:20

LiE said:
Their annual reports state they are 'a going concern', so not exactly great.

https://monzo.com/static/docs/monzo-annual-report-2021.pdf

Will be interesting to see the 2022 report.

Maybe I'll stick with natwest for now...also think I get breakdown cover with my natwest account vs paying slightly extra with Monzo.

Martynt74 · 23 May 2022 at 11:32

LiE said:
Their annual reports state they are 'a going concern', so not exactly great.

https://monzo.com/static/docs/monzo-annual-report-2021.pdf

Will be interesting to see the 2022 report.

That's standard and something you'll see on the financial statements of even the most profitable and cash rich companies out there. The issue would be if it said they weren't a going concern!

The concept of going concern
An entity prepares financial statements on a going concern basis when, under the going concern assumption, the entity is viewed as continuing in business for the foreseeable future. The term ‘foreseeable future’ is not defined within ISA 570, but IAS 1®, Presentation of Financial Statements deems the foreseeable future to be a period of at least 12 months from the end of the reporting period.

The concept of going concern is an underlying assumption in the preparation of financial statements, hence it is assumed that the entity has neither the intention, nor the need, to liquidate or curtail materially the scale of its operations. If management conclude that the entity has no alternative but to liquidate or curtail materially the scale of its operations, the going concern basis cannot be used and the financial statements must be prepared on a different basis (such as the ‘break-up’ basis).

CapitalOne · 23 May 2022 at 11:39

Martynt74 said:
That's standard and something you'll see on the financial statements of even the most profitable and cash rich companies out there. The issue would be if it said they weren't a going concern!

indeed, not to be confused with "of ongoing concern"!

LiE · 23 May 2022 at 11:52

Martynt74 said:
That's standard and something you'll see on the financial statements of even the most profitable and cash rich companies out there. The issue would be if it said they weren't a going concern!

Yea I think I've misused that term, but in this context from the report it makes more sense with what you said:

The risk our plans don’t deliver the expected financial and non-financial benefits to our stakeholders, could also lead to a loss of confidence, reputational damage or difficulty fundraising. So as mentioned in Note 1 of the financial statements, the Directors recognise this risk casts a material uncertainty over our ability to continue as a going concern.

Robert · 23 May 2022 at 12:10

Hmmm...shame Starling don't offer the phone insurance/holiday insurance combo

Dirk Diggler · 23 May 2022 at 12:36

Are any of you using Starling or Monzo for a child's account?

mid_gen · 23 May 2022 at 12:36

LiE said:
Yea I think I've misused that term, but in this context from the report it makes more sense with what you said:

This is completely normal. Go and download any annual report from any company, they will have a section listing all the potential risks to the company.

e.g. one of the many risk entries in BP's last annual report -

We face challenges in developing major projects, particularly in geographically and technically challenging areas. Poor investment choice, efficiency or delivery, or operation challenges at any major project that underpins production or production growth, could adversely affect our financial performance.

Monzo may be a turd ( I don't know), but known risks in the annual report isn't a warning sign they are going down the toilet....merely that it is an identified potential risk.

dlockers · 23 May 2022 at 12:38

mid_gen said:
This is completely normal. Go and download any annual report from any company, they will have a section listing all the potential risks to the company.

e.g. one of the many risk entries in BP's last annual report -

Monzo may be a turd ( I don't know), but known risks in the annual report isn't a warning sign they are going down the toilet....merely that it is an identified potential risk.

Not sure how often "obtaining funding" to maintain operations is a material risk tbh.

mid_gen · 23 May 2022 at 12:53

dLockers said:
Not sure how often "obtaining funding" to maintain operations is a material risk tbh.

I'd imagine funding drying up being a material risk to most financial institutions(see 2007/8) and growth startups.

englishpremier · 23 May 2022 at 13:08

Martynt74 said:
That's standard and something you'll see on the financial statements of even the most profitable and cash rich companies out there. The issue would be if it said they weren't a going concern!

LiE misquoted the report. It was that E&Y feared for Monzo as a going concern, as in, unless it does something soon to raise cash and stem loss it will be going out of business

Anyway, we know Monzo isn't really going anywhere. It's not an issue given the number of organisations would be lining up to gain 4m+ UK banking customers.

uvarvu · 23 May 2022 at 13:22

Robert said:
Hmmm...shame Starling don't offer the phone insurance/holiday insurance combo

There’s a Curve card for that.

dlockers · 23 May 2022 at 13:41

englishpremier said:
LiE misquoted the report. It was that E&Y feared for Monzo as a going concern, as in, unless it does something soon to raise cash and stem loss it will be going out of business

Anyway, we know Monzo isn't really going anywhere. It's not an issue given the number of organisations would be lining up to gain 4m+ UK banking customers.

Is there a graceful exit process for failed banks (like home utility providers)?

Goodie · 23 May 2022 at 14:05

Dirk Diggler said:
Are any of you using Starling or Monzo for a child's account?

Interested in this too. I am considering this in a couple of years when my daughter is a bit older.

Robert · 23 May 2022 at 15:09

uvarvu said:
There’s a Curve card for that.

Are they popular? Can you give me a brief splainer?

englishpremier · 23 May 2022 at 15:18

dLockers said:
Is there a graceful exit process for failed banks (like home utility providers)?

They get bought, or their loan book, customers etc.. gets bought either privately or by the Government.

For customers there is the FSCS protecting deposits of up to £85k and with payments usually carried out within 7 days.

Dirk Diggler · 23 May 2022 at 15:51

Goodie said:
Interested in this too. I am considering this in a couple of years when my daughter is a bit older.

I did some digging, Starling do a facility that looks like you can allocate a pot from your account to link to a debit card. It costs £2 per month and I'm not sure that's worth it for managing her pocket money TBH.

uvarvu · 23 May 2022 at 20:21

Robert said:
Are they popular? Can you give me a brief splainer?

Sure. It’s a mastercard debit card but not a bank account so checks needed to get one. You add your other cards to it via the accompanying app which means you only need to carry that although I carry a credit card as backup. You can earn cashback on it and if you connect it to an existing cashback card you‘ll get both rewards. The card is free but you can pay a monthly subscription to get a metal one which has mobile and travel insurance. You can also use it as a way to pay with your credit card at places that only accept debit cards - I really like that feature!

Curve | Supercharge your money

www.curve.com

Monzo/Starling Banking/Revolut

The concept of going concern​

The concept of going concern