The United Kingdom’s competition watchdog has issued a warning to U.K. challenger bank Monzo over a breach of retail banking regulations under the Retail Banking Market Investigation Order 2017.
In a Monday (Jan. 31) letter, the Competition and Markets Authority (CMA) said the neobank didn’t honor a requirement of the order because it failed to publish the monthly minimum charge (MMC) for personal current accounts in its Fee Information document. The breach occurred during a two-year period, from Oct. 25, 2018, to Nov. 19, 2021.
According to the CMA, the measure is a key element of reforms made following the Market Investigation and is “designed to make it easier for consumers to be aware of the charges they may be liable to pay and compare this information easily against other [personal current account (PCA)] providers.”
By not properly communicating that information, the CMA said it is “concerned” that the bank’s PCA customers may have missed the MMC — currently 15.50 British pounds (about $21) — “since it was not displayed each time information on Monzo Bank’s fees and charges for exceeding a pre-agreed credit limit was disclosed.”
The regulator added: “The CMA is also concerned that Monzo Bank’s Internal Audit Report failed to identify that Monzo Bank’s Fee Information document was non-compliant with the order.”
Colin Garland, director of Remedies, Business and Financial Analysis at the CMA, who signed the letter, noted that Monzo Bank has since taken steps to end the breach and to comply the order by updating its fee information in November and strengthening “its product governance to improve awareness of all regulatory obligations.”
The challenger bank had also ensured that terms and conditions, including the Fee Information document, were changed to align with Monzo Bank’s full governance process while expanding the size of its risk management and compliance teams.
“Given the action already being taken by Monzo Bank, the CMA does not consider it appropriate to take further formal enforcement action in relation to this breach at present,” Garland said in the letter on behalf of the CMA adding that it will monitor the bank’s future compliance “closely” moving forward.
Read more: Challenger Bank Monzo Abandons US Banking License Application
See also: US Dreams Dashed But UK and EU Neobanks Brim With Potential in 2022
This is the second time in less than a year that the bank has received a warning from the regulator, after a June report revealed that it had breached a rule under the same order requiring it to send banking transaction histories to over 143,000 former account holders.
Better Days Ahead
Founded in 2015, the British digital bank had a rough couple of years, with pandemic-related card transaction declines leading to plummeting valuations and heavy losses of about 130 million British pounds (about $175.5 million) in 2020. The U.K. firm also pulled back its application for a U.S. banking license in October last year, ending its plans to enter the United States market.
Monzo further faces a Financial Conduct Authority (FCA) investigation over allegations of possibly violating anti-money laundering (AML) laws, with the probe potentially including both criminal and civil liability.
Read more: Monzo Faces FCA Investigation Into Alleged AML Contraventions
Despite these legal and pandemic-related business challenges, the future looks bright for the firm, helped by growing investor interest and a 23% increase in customer sign-ups.
Earlier this year, the firm secured fresh capital after Chinese technology giant Tencent made a $100 million capital injection for a minority stake in the company, as part of a $600 million fundraising round that values the British digital bank at $4.5 billion.
See more: China’s Tencent Takes Stake in UK Challenger Bank Monzo
And after introducing a buy now, pay later (BNPL) product last September that made Monzo one of the first U.K. banks to venture into the fast-growing but controversial sector, the bank is now preparing to take a deeper dive into cryptocurrency trading.
Read more: UK Digital Bank Monzo Raises $500M at $4.5B Valuation as it Readies for Crypto
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More