1.

0 Introduction
This report will explore companies Monzo and Revolut, and will conduct a
joint PESTEL analysis and individual SWOT analysis of both companies. These
analyses will help to evaluate the external and internal environmental factors that
could impact the companies in the future. Under the PESTLE analysis and each SWOT
table, some more in-depth analysis of the identified external and internal factors will
be conducted and explained. A comparison of the two companies, based on these
analyses will then be presented, and a conclusion of some of the main take-away
points will end the report.

2.0 What is Monzo?

Monzo is a mobile-only, digital bank that is based in the United Kingdom (Carey,
2018). It was one of the first of several new app-based banks, known as ‘challenger
banks’ in the UK (Carey, 2018).  Originally, the company operated through a mobile
application and a pre-paid debit card, but when UK banking licence restrictions were
lifted in 2017, the company were able to offer a current account to consumers
(Monzo, 2017). More than 750,000 people are now using the company’s current
accounts and more than two billion pounds has been spent through Monzo so far
(Monzo, 2019).

3.0 What is Revolut?

Revolut is a UK based financial technology company, offering various banking
services, such as prepaid debit cards, cryptocurrency exchange and fee-free currency
exchange (Dillet, 2015). With a standard account with Revolut, a consumer gets a free
UK current account and a free euro IBAN account (Russon, 2019). Originally Revolut
was not a bank and in December 2018 announced that it had been granted an EU
banking licence (Russon, 2019). Currently, the company’s services are only available
in Europe but Revolut has already reached 4.5 million customers, 1.6 million of which
are in the UK (Russon, 2019).

4.0 PESTLE Analysis Table

POLITICAL ECONOMIC SOCIOLOGICAL

Political interference is a big risk in the Economic losses from fraud in banking Engagement with mob
banking industry (Moore, 2010).   industry are very high (Crowe, 2019).   UK consumer is on the rise
December elections could impact economy could be drastically impacted by 2019a).   In the UK 71%
banking policies - new government could Brexit, e.g rapid increase in joblessness, interactions are online
mean new legislation or regulations.   impact on GDP and inflation (Partington is set to increase furthe
Brexit could have big impacts for many and Weardon, 2019).         2019b).   Demand for d
sectors, including banking (Partington, amongst UK customers
2019). substantially in 2018 (M

TECHNOLOGICAL ENVIRONMENTAL LEGAL

Key barriers to adoption of banking Environmental crisis has led to more High probability for ch
technology is security and privacy people wanting to lower their carbon in many industries, incl
concerns (Greaves, 2019).   85% people footprint and be environmentally friendly. due to Brexit, and Dece
prefer not to talk to a robot when This means digital banks could be the UK.   Current intens
banking (Fawthrop, 2019c).   Only 15% of favoured as the need to drive to a branch digital banks due to all
people want institutions to invest in is reduced, alongside less need for paper fraudulent accounting
voice-banking services powered by AI use, and in-branch energy usage management culture (F
(Fawthrop, 2019c).   (Townsend, 2018).         2019).      

4.1 Political Factors

The banking industry as a whole can be heavily impacted by political interference
(Moore, 2010). According to one report, ‘Politicisation’ of banks resulting from
takeovers and bailouts may pose a major threat to their financial health (Moore,
2010). Political instability caused by Brexit may also have a significant impact on the
banking industry (Partington, 2019). Political instability can cause problems such as
investors not wanting to commit to companies, negative impact on credit constraints
and capital accumulation (Herrela and Ariss, 2013). In particular, in the UK December
election results may impact Monzo and the banking industry as a whole as if a
different party wins, this could mean new regulations or legislation could be
implemented.

4.2 Economic Factors

Economic losses resulting from fraud are very high, with the global cost of economic
fraud, when taken as a proportion of global GDP for 2017, being equal to £3.24
trillion (Crowe, 2019). This suggests that fraud could be a key issue for Monzo and
Revolut, and something that the companies should try and prioritise and protect
themselves against. The UK economy could be drastically impacted by Brexit, which
could then have a knock-on effect on the banking industry. There is a lot of debate
about what the impact of Brexit would be on the banking industry, with the governor
of the Bank of England suggesting that the impact of a no-deal Brexit on the UK
economy would be less severe than first thought, and estimating that GDP would
drop by 5.5%. This is still a sizeable economic shock but less damaging (Partington
and Wearden, 2019). However, other sources suggest that Brexit could be very
damaging indeed, claiming the UK economy will be 3.5% smaller than if it had stayed
in the EU (Islam, 2019), or could be plunged into a recession (Tolhurst, 2019). It is
also claimed that joblessness would rapidly increase with a no-deal Brexit, increasing
the UK’s unemployment rate to more than twice its current level, at about 7%.
Inflation could also double to more than 5.5% (Partington and Weardon, 2019). The
uncertainty associated with Brexit has already begun to drive up job losses across
Britain as political turmoil holds back the economy (Partington, 2019). The number of
people in work has dropped by the largest margin in four years, with companies
putting hiring plans on hold, losing contracts and facing delays due to the
uncertainty with Brexit (Partington, 2019). Ultimately though, the true impact of
Brexit cannot be fully known until the negotiation process is over and it is decided
what kind of deal, if any, has been struck. This means companies, like Monzo and
Revolut need to be prepared to adapt to whatever the outcome may be.

4.3 Sociological Factors

Changing consumer expectations are fuelling the increase of digital banks in the UK,
which could be a great opportunity for Monzo and Revolut (Fawthrop, 2019a).
Alongside this, engagement with mobile banks with UK customers is on the rise, with
digital channels being the most favoured method of personal finance (Fawthrop,
2019a). Furthermore, 71% of all banking interactions are online or digital compared
to 6% happening in branch and 59% of UK consumers claim to have used mobile
apps to access financial services (Fawthrop, 2019b). This suggests clear societal
changes in the UK, with many more people choosing to do banking online, and less
traditional in-store banking. Ultimately, demand for digital banking amongst UK
customers has grown substantially in 2018, and research suggests an increasing gap
of customer satisfaction levels between direct banks and branch-based banks, with
direct banks coming out on top (Fawthrop, 2019a). A study commissioned by
Mastercard found that convenience remains to be the biggest advantage of digital
banking solutions, and additionally, Europeans demand security more than ever as
their most important criteria for using digital banking solutions (Mastercard, n.d).
Alongside this research, it was found that two-thirds of people expected the demand
for digital banking solutions to increase in the future, and more than half of
Europeans said they would consider switching to a digital bank (Mastercard, n.d). All
of this evidence suggests that the outlook, in terms of consumer demand for banks
like Monzo and Revolut, is generally very positive. It also suggests that Monzo and
Revolut should potentially focus on reassuring consumers about the convenience
and security strategies they have in place, to further inform and persuade consumers
about the benefits of this type of bank.

4.4 Technological Factors

There has been a vast increase in the uptake of technology in the banking sector, but
privacy and security are major concerns creating key barriers relating to the adoption
of technology in this sector (Greaves, 2019). Issues with TSB online banking services
locking their consumers out of accounts has also had a negative impact surrounding
the use of digital banking services (Butterworth, 2018). This is likely to have impacted
the reputation of digital banking and Monzo and Revolut will need to reassure
consumers about these types of issues and explain strategies they have in place to
avoid them. One study from ING Bank also found that consumers are still somewhat
nervous about adopting new technologies, with two in three never using voice
recognition or fingerprint access to log into their banking app (Greaves, 2019). This
could be problematic for digital-only banks, as it suggests people might still prefer a
more traditional approach, or, are not ready to use the most recent technology to
access their banking services. It suggests that Monzo and Revolut should potentially
wait until consumers are fully confident with the digital-only approach, before
pushing other new technologies in their marketing, such as voice recognition. This
will help to make sure the companies don't overwhelm consumers. Another study
found also found that although a large majority of people agreed that the latest
financial technologies should be available to them, there was a reluctance to adopt
newer digital ways of managing money (Greaves, 2019). This is reflected in the fact
that only 12% of Britons have fully switched to a digital-only bank and 47% of those
who use services such as Monzo and Revolut, keep less than £1000 in them (Greaves,
2019). However, it is also suggested that over time, if new digital approaches are
shown to be useful, reliable and socially accepted, the uptake of new banking
technologies could be rapid (Greaves, 2019). Furthermore, it was found that 85% of
people prefer not to talk to a robot when banking and only 15% want institutions to
invest in voice-banking services powered by AI (Fawthrop, 2019c). This suggests
there is still a demand for banks to have traditional aspects available, such as people
to talk to over the phone or in-branch. This suggests Revolut should consider
investing in telephone helplines, not just online chat customer service. It also
suggests that both companies potentially shouldn’t look to invest in voice-banking
services in the near future.

4.5 Environmental Factors

The environmental crisis has put more pressure on businesses and individuals to cut
down their carbon footprint and invest in renewable sources of energy. Energy
management, in particular, is being addressed by many banks globally, and many
have already given consumers the option to go paperless for their statements and
transactions. The use for paper is further reduced with digital-only banks, which can
only be a positive factor with so much pressure on businesses to become more
environmentally friendly. Additionally, the need to drive to a bank is also reduced
with online banks, which means fewer carbon emissions. This should be a factor that
Monzo and Revolut push in terms of marketing, as it is such an important and
current problem that is very much at the forefront of many consumers’ minds. This is
shown through research which found that 88% of consumers want businesses to help
them be more environmentally friendly (Townsend, 2018).

4.6 Legal Factors

The risk of legislations and regulations being altered is potentially higher at the
current time, due to the political instability in the UK, and potential impacts from the
UK December elections. Ultimately, there is a high probability for change of
regulations in all industries though, including banking, due to Brexit. New regulations
could heavily impact how Monzo and Revolut would have to operate, and this could
cause complicated legal issues that the companies would need to overcome. Various
high growth startups in the digital banking sector have also recently been under
intense scrutiny following allegations of issues such as AML deficiencies, fraudulent
accounting and toxic management culture (Finextra Research, 2019). This means that
Monzo and Revolut must make sure that they are complying strictly with all
applicable laws, as it seems that they are also likely to come under intense scrutiny,
due to the issues with similar companies. Additionally, Monzo was only able to offer
current accounts after UK banking licence restrictions were lifted in 2017, therefore if
these restrictions were put back in place it may leave the company with some big
problems, and unhappy consumers.

5.0 Monzo SWOT Analysis Table

Strengths Weaknesses

Ease of use of app and options such as instant spending Lack of human interaction, which was shown
notifications and a clear and intelligent budgeting system for (Fawthrop, 2019a).   Monzo is currently runn
consumers to use (Fotis, 2019).   Security options to help can be very risky for a business, and it seems
reassure consumers, such as freezing of card option (Janes, continue to increase, due to spending on sta
2019).   Energy switching system which is fairly unique and (Megaw, 2019).   The company experienced a
could help make Monzo stand out from other providers potentially negatively impacting their reputa
(Meadows, 2019).   Monzo was ranked as one of the best concern over security measures with digital b
ethical current accounts (Jones, 2018).   Monzo consumers are
covered by FSCS deposit protection, further reassuring
consumers their money is safe (Bannister, 2019).   Can use the
app on an iPhone, iPad, iPod touch and Apple Watch (Janes,
2019)

Opportunities Threats

Within the 18-27 age bracket 40% are choosing to use a
mobile banking app as their primary bank, rather than a more
well-known brand (Fawthrop, 2019a).   Using AI for fraud
protection and following in the footsteps of Mimiro (Fawthrop,
2019c). Expanding further internationally, for example into
Asian markets, where digital banks have started to increase in
popularity (Cheh, 2019).
Traditional banks are responding to challeng
investing in and partnering with new techno
better compete, which could negatively impa
banks (Taddia, 2016).   Few people are using
their main banks, and are keeping lower amo
them, with 47% of consumer using digital ba
than £1000 in the account (Greaves, 2019).  
chaos in terms of the economy and could m
regulations and legislation in the banking ind
negatively impact Monzo.  
5.1 Monzo Strengths
Monzo have been praised for numerous elements of their business model and app
design, including the ease of use of their app (Fotis, 2019). This is especially
important, as it is likely that some of the consumers who use their app, may not have
used one beforehand. If a company’s app is confusing, or hard to use, it could be
very off-putting for consumers, especially when it is the only way the consumer can
use the services offered by Monzo. Monzo consumers also have the options of
instant spending notifications, meaning that they can easily see what they have
spent, and this can further help them to instantly see if something fraudulent is
happening, as they can see the notification come up and subsequently immediately
act (Nixon, 2019). It could additionally help consumers to track spending and help
them to save, helped also by Monzo’s clear and intelligent budgeting system (Fotis,
2019). The company offer some useful security options to help reassure consumers,
such as the option to freeze their card if a card is lost or stolen. This is vital as
research showed that security was a key barrier when it came to consumers adopting
new technology for banking services. Recently, Monzo has introduced an energy
switching system too, which claims to be able to save consumers money by switching
to cheapest deal available for them if they use the account to pay for their gas and
electric bills (Meadows, 2019). This could further entice consumers into using the
company, as it is a fairly unique option, and is very convenient for a consumer. This is
a strength for the company as convenience was a key factor that consumers looked
for with digital banks. Additionally, the company was ranked very highly as being one
of the best ethical current accounts, further appealing to the ethically conscious
consumer (Jones, 2018). Furthermore, consumers with Monzo are covered by FSCS
deposit protection, giving them more security over their money and helps to
reassure them their money is safe. Additionally, Monzo’s app is compatible with a
variety of different products, including iPads, smartphones and Apple watches (Janes,
2019). This is a key strength as tablets, wearable devices and smartphones were the
most popular channels for people to interact with their bank (Fawthrop, 2019a).

5.2 Monzo Weaknesses

A key weakness with Monzo could be that human interaction is still valued highly
among consumers when wanting to contact their bank (Fawthrop, 2019a). This
means that consumers may not want to choose a digital-only bank as they still want
human contact, for example, in-branch and assume that Monzo doesn’t provide this.
Even though Monzo does have a customer service phone number, it still could be
off-putting for some consumers that prefer to speak face-face with their bank.
Another key weakness with Monzo is that the company are currently running at a
loss which can be risky and off-putting to potential investors. It can furthermore be
off-putting to consumers who want to set up banking with the company, as they
could misunderstand this and think that the company are failing. Furthermore, a
major weakness is the company’s recent security breach which led to customer PINS
being copied onto files which could then be accessed by engineers, despite being
encrypted (Pugh, 2019). This is likely to have negatively impacted the company’s
reputation and potentially caused consumers to lose trust in the company. The way
in which this particular issue was security-based is potentially even more problematic,
as security issues were a key barrier when it came to consumers adopting new
technology in banking services. This means that those who were anxious about using
this type of digital-only bank could have been deterred by this recent issue.

5.3 Monzo Opportunities

There are a variety of opportunities in the digital banking sector. Research showed
that 40% of people in the 18-27 age bracket were choosing to use a banking app as
their primary bank, instead of a more well-known name (Fawthrop, 2019a). This
suggests that Monzo should primarily aim the app at people in this age range, as it
seems that they are already potentially interested in this type of product, and are,
therefore, a key market. Another potential opportunity for the company is the use of
AI for fraud protection, following in the footsteps of fellow UK fintech Mimiro
(Fawthrop, 2019c). Mimiro managed to raise 22.9 million in financing for its anti-
money laundering fraud prevention (Fawthrop, 2019c). Implementing AI correctly
could reap big rewards for the company, including increased security, lower costs
and higher customer satisfaction (Fawthrop, 2019c). Another potential opportunity
for the company is to expand further internationally, into Asian markets, where there
is a growing number of digital banks appearing (Cheh, 2019). This is shown through
the fact that digital banking penetration in Asia’s emerging markets has, on average,
increased 3-fold since 2014 (Cheh, 2019). This is thought to be due to the regions
growing number of young, affluent and smartphone-first population (Cheh, 2019).

5.4 Monzo Threats

There are several threats that Monzo needs to consider when making future strategic
business decisions. Banks are now responding to challenger banks, like Monzo, by
investing in and partnering with new technology providers (Taddia, 2016). For
example, BBVA has bought digital-only banks Atom and Simple, and Clydesdale and
Yorkshire Bank’s app-based bank (Taddia, 2016). This is so that they can better
compete, and essentially give customers both traditional and innovative options, in
the same place, when it comes to banking. This could put digital-only banks at risk,
and make it harder for them to compete in the market. Monzo will need to
comprehensively look at what messages they can push with their marketing to show
consumers how they don’t need any of the bonuses of traditional banks, such as in-
store customer service. It would also be potentially useful to inform consumers that
Monzo could be the more environmentally friendly brand, with the lack of need to
go to a branch and less need to waste paper. Another threat to Monzo is how
consumers are using the banking service. Few people are currently using digital
banks as their main banks, and are therefore keeping lower amounts of money in
them (Fotis, 2019). This is shown through a study which found 47% of consumers
using digital banks kept less than £1000 in the account (Greaves, 2019). Monzo,
therefore, needs to focus on how to persuade consumers to use their digital-only
service as their primary bank. Furthermore, a big current threat is the changes that
may come from Brexit and the UK December elections. It is impossible to guess what
the outcomes of these issues may be, but there are many changes in the economy
and in regulations and legislation that are possible, and that could negatively impact
the company. This means Monzo need to be prepared to adapt to a potentially
changing industry climate.

6.0 Revolut SWOT Analysis Table

Strengths Weaknesses

Offers an impressive range of innovative products, for example Revolut consumers are not protected by the F
transfers into 29 different currencies and offers cryptocurrency competitors Monzo and Starling consumers a
exchange (Russon, 2019).   Larger global market of users, 2018).   Can only be contacted by online chat
compared to Monzo (Whitwell, 2018).   Offers options such as telephone number  (Whitwell, 2018)   Charge
instant payment notifications and security features such as a person wants to close account or swap to a
freezing the consumers card via the app (Warren, 2019).   (Whitwell, 2018).   A whistleblower complaine
Compared to competitors Monzo and Starling, Revolut is the 2016 asking it to investigate the compliance o
cheapest when sending money abroad, as there is no charge conduct of its chief executive, specifically bec
up to £5000  (Revolut, 2019).   Travel and device insurance can in place for flagging suspect payments were c
be added, using geolocation and offers pay per day cover, inadequate (Russon, 2019).   Advertising cam
with great flexibility (Finextra, 2018).       shaming single people was featured for Valen
(Russon, 2018).    

Opportunities Threats

Further expansion internationally into areas outside of Europe, Traditional banks are trying to keep up with d
for example Hong Kong. In Hong Kong retail banking is very investing in newer technology, e.g Lloyds hav
profitable and there is a lot of potential for digital only banks banking app, including introduction of a savin
(Crow and Ruehl 2019).   Within the 18-27 age bracket 40% instant payment notifications (Nixon, 2019).  
are choosing to use a mobile banking app as their primary Monzo and Starling offer some interest with c
bank, rather than a more well-known brand (Fawthrop, 2019a). criteria and partners e.g Monzo has partnered
and now offers 1% with an instant access acc
minimum initial deposit of £500, whereas Rev
interest at all (Richardson, 2019).   Competito
Starling also offer unlimited ATM withdrawals
only allow up to £200 free (Revolut, 2019).    

6.1 Revolut Strengths

Revolut offers a very impressive range of innovative products and services for
consumers, including transfers into 29 different currencies and cryptocurrency
exchange (Russon, 2019). This means the company can appeal to a wide array of
consumers, and in particular, could appeal to those who may frequently travel
abroad. Another strength that could appeal to travellers particularly, is how Revolut is
the cheapest, compared to key competitors Monzo and Starling, when consumers
want to send money abroad, having no charge for this service (Revolut, 2019).
Additionally, the company offer travel and device insurance, which can be added and
paid by the day, with great flexibility (Finextra, 2018). Additionally, the company have
a larger global market of users, compared to key competitor Monzo (Whitwell, 2018).
This means they have a larger potential target market and operate in more countries
than Monzo does, too. Revolut offer options such as instant payment notifications
and security features such as freezing the card via the app (Warren, 2019). This can
help to reassure consumers that their money is safe, which is important as security
was a key barrier relating to the adoption of technology in the banking industry. It
could furthermore have the potential to detect fraud quicker, as if a consumer sees a
payment notification that wasn’t them, they can quickly act.

6.2 Revolut Weaknesses

Revolut has several weaknesses that could impact them negatively in the future.
Firstly, consumers are not protected by the FSCS (Whitwell, 2018). This could be very
off-putting for consumers as FSCS is a type of protection for people’s money, and
ensures that if a bank fails, consumers are protected up to certain amounts, and
therefore don’t lose all their money (Financial Services Compensation Scheme Ltd,
2019). Another weakness of Revolut is how consumers can only contact the company
via online chat (Whitwell, 2018). There is no telephone number, which could be
frustrating if consumers need immediate help and are not finding that help over
online chat. It could also be frustrating for consumers who are more comfortable
seeking help over the phone. Furthermore, it was found that human interaction is still
valued by consumers in the banking industry (Fawthrop, 2019a), so this could be
something Revolut should think about introducing (Fawthrop, 2019c). Another
weakness with Revolut services is that they charge downgrade fees for consumers
who want to swap to a cheaper account option or for those with a premium account
who just to close their account altogether (Whitwell, 2018). This could be frustrating
for consumers, in particular for those just wanting to close an account, as they are
essentially be asked to pay before they are allowed to close an account. This could
lead to the person becoming frustrated, and not wanting to ever use the service
again, alongside potential negative word-of-mouth marketing. Another weakness for
Revolut is the bad press they have gained, as a relatively new company. They have
had numerous issues that have resulted in negative press and thus potentially
negatively impacted their reputation. One of these is when a whistleblower
complained to the FCE in 2016, asking it to investigate the compliance of Revolut
and conduct of its chief executive, specifically as the systems in place for flagging
suspect payments were inadequate (Russon, 2019). This could suggest to consumers
that the company is not safe to use, causing further problems. Another example of a
further publicity issue was when Revolut released an advertising campaign for
Valentine’s day 2016, which many people claimed was shaming single people
(Russon, 2018). All of the negative press could lead to a negative reputation and be
very off-putting for consumers. This is especially important since the company is
fairly new, and therefore potentially isn’t seen as being as reputable as a traditional
banking service provider.

6.3 Revolut Opportunities

A key opportunity for Revolut is further expansion into areas outside of Europe. A
particular opportunity could be in Hong Kong, where retail banking is very profitable
and there is a lot of potential for digital-only banks (Crow and Ruehl, 2019). Another
key opportunity is the 18-27 age bracket, as 40% are choosing to use a mobile
banking app as their primary bank, rather than a more well-known brand (Fawthrop,
2019a). Another market that could be a good opportunity for Revolut is within the
18-27 age group, but specifically travellers within this age bracket. This is because
the company have a few options, such as currency exchange, which would appeal to
travellers. Furthermore, within the 18-25 age range 230,000 young people choose to
take a gap year a