Bitcoin investors hoping to make billions may end up with a sack of fool’s gold

The cryptocurrency may not be a threat to the world economy, but that should not stop regulators from protecting investors from it

Sifting the Yukon river for gold was a waste of time for most of the 100,000 prospectors seeking to make themselves rich in the 1890s. The same can be said of the bitcoin miners who dream of striking it rich by getting their hands on some of the extremely lucrative and painfully elusive electronic currency.

Relatively few people have managed to decipher the codes needed to extract bitcoins from the 21 million locked inside the mathematical problems set by its creator, the software engineer whose true identity is unknown but who goes by the name Satoshi Nakamoto.

Those who have employed enough computer power and code-cracking know-how can consider themselves rich now that the value of one bitcoin has soared from $753 last December to around $10,000. The rest have deployed huge amounts of energy and time for no return.

Should anyone be worried about this turn of events? Or will it go down as a moment in history when an asset was mined, some people got rich and … that was it?

The ambitions of the bitcoin community mean the creation of a new currency must be taken more seriously. Its stellar rise in the last 18 months is likely to have sucked in thousands of speculators, many of them ordinary investors.

And with mainstream financial exchanges looking to host bitcoin as a tradeable asset, or list derivatives of bitcoin on their trading boards, thousands more will be sucked in over the next 18 months.

Where ordinary investors, hunting in large numbers, seek a return on their savings in a high-risk environment, governments are usually minded to regulate.

The idea behind bitcoin was that it should be like any commodity that, once discovered, became increasingly difficult to extract. Like gold, it would become a store of value and make those clever enough to find it and believe in it very rich.

Jamie Dimon described bitcoin as only fit for use by drug dealers, murderers and people living in North Korea. Photograph: Eric Piermont/AFP/Getty Images

The distributed ledger designed to make each bitcoin account secure and accountable without the need for third parties, like banks, to be involved became for many participants a potential template for all future deposit saving and trading.

To that end, it was also viewed as a replacement currency to the dollar, euro or pound – one that could not be manipulated by central banks, which are only too keen to print extra notes, and thereby devalue the currency, in times of trouble. It is a seductive package that has led many in the banking industry – those most under threat – to call it a fraud.

Goldman Sachs boss Lloyd Blankfein said so last week, adding his voice to JP Morgan’s Jamie Dimon.

Dimon described it as fraud that would ultimately blow up and said the desire to hide funds from regulators and the police meant it was only fit for use by drug dealers, murderers and people living in places such as North Korea. Blankfein was more concerned that its volatile price, which dropped 20% in less than 24 hours after topping $11,000 last week, disqualified it from being a sensible currency.

Sir Jon Cunliffe, a deputy governor of the Bank of England, summed up the view of many in the City when he said calmly that bitcoin was a sideshow and too small to pose a systemic threat to the global economy.

To cover his flank against accusations that the Bank, which is the UK’s chief financial regulator, was too dismissive of the issue, he also cautioned that bitcoin investors needed “to do their homework”.

No doubt all bitcoin investors think they have done their homework. And regulators probably think they have enough work to do. But while it is easy to say that a fool and their money are soon parted, anyone who interacts with the financial services industry is a potential victim. And, with this in mind, regulators should be ready to impose all the usual tools of misselling rules and compensation schemes on this freshly minted industry.

At the moment, bitcoin is having a free ride. The tipping point is close. Regulators should be prepared.

Grayling mustn’t shunt true cost of rail network into the sidings

Another private operator on the east coast mainline, another bailout. History is repeating itself – again – and Chris Grayling is in the middle of the farce.

The transport secretary’s efforts to drum up a narrative of reversing Beeching cuts could not eventually conceal the small print in his rail strategy: a shabby face-saving deal with Stagecoach and Virgin, two firms who have richly profited from privatisation. Their Virgin Trains East Coast joint venture is to be curtailed, meaning that billions promised to the taxpayer by private-sector firms have again proved to be notional.

The government was in an invidious position: a delay to infrastructure upgrades by Network Rail and the shaky entry into service of Hitachi trains commissioned by the Department for Transport certainly gave the operators cause for complaint. Yet it will appear once again that private firms expect the downside to lie with the taxpayer.

Stagecoach/Virgin has a rich history of getting its way with the DfT, notably during the 2012 west coast franchise debacle, where it wrested back control of the contract from First Group. Since then, soul-searching reports have concluded that franchising does, indeed, work – but evidence has also accumulated to the contrary.

Competition has all but vanished: both parties in that west coast fiasco have been allowed to hang on to large franchises well into the next decade. The Thameslink megafranchise has turned Govia, which previously ran Southern services without much mishap, into a basket case. National Express has turned its back on rail and Stagecoach’s shares rocketed once news sank in that it was exiting East Coast early.

What franchising does offer the government is the fig-leaf of privately owned railways, even as it effectively dictates whether guards stay on trains, and by how much fares should rise.

Taking the flak directly, from commuters or unions, would not be for the fainthearted: Labour’s pledge to renationalise, slowly, is pragmatic. Yet an honest conversation about the true costs of the rail network, and who does and should invest, is long overdue. Grayling’s latest sleight of hand shows it is unlikely to be forthcoming soon.

No, Jeremy Corbyn – banker baiting’s bad for business

Picking a fight with a banker is still a good sport, 10 years after Northern Rock collapsed. Jeremy Corbyn knows it will provoke his supporters to chant his name to the tune of the White Stripes song Seven Nation Army once again. He knows it will earn the cheers of many beyond Labour’s membership ranks.

So there is probably little shock value in his response to Morgan Stanley last week after the US investment bank’s analysis that a Corbyn government would be bad for its clients and investors more generally. However, a prime-minister-in-waiting might want to be more circumspect about revolutionising an industry that accounts for more than 10% of GDP and makes a huge contribution to improving the UK’s balance of payments.

It’s an uncomfortable truth that Britain would find life difficult without the foreign banks in the Square Mile. Careful reforms are needed, not knee-jerk reactions.

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Is block power about to revolutionise banking? | John Naughton

Blockchain technology has the potential to bring the world of finance into the modern world. And it cant come soon enough

Science advances, said the great German physicist Max Planck, one funeral at a time. Actually, this is a paraphrase of what he really said, which was: A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it. But you get the drift.

I always think of Plancks aphorism whenever moral panic breaks out over the supposedly dizzying pace of technological change. Which happens all the time nowadays, even though the data says otherwise. If you take as your measure of speed how long it takes a new technology to be adopted by 50% of US households, for example, then radios (eight years) and black-and-white TVs (nine) reached that threshold faster than PCs (17) or mobile phones (15).

So when we talk about the pace of change, it makes sense to distinguish between different kinds of innovation. If the change requires the building of infrastructure the electricity grid or the internet, say then the pace of change can be very slow. But if it just involves innovations that harness existing infrastructure new TV formats or smartphone apps the pace can indeed be dizzying, because they just piggyback on existing infrastructure. This is why Uber and Airbnb took so long to materialise: they needed smartphones, GPS and ubiquitous wireless networking before they became viable, whereas Facebook only needed the web. And the web itself spread like wildfire only because the infrastructure it needed the wired internet was already in place. No digging required.

Where the trope about accelerating technology-driven change really breaks down, though, is when you try to apply it to governmental, legal and commercial institutions. What you then find is a chaotic spectrum that runs from astonishingly rapid change in some areas to glacial inertia in others. On the governmental/regulation front, for example, data protection legislation is fighting a losing battle against the proliferating ambiguities of big data. Yet at the same time, we learn from Edward Snowden how far the NSA and GCHQ have been ahead of the technological curve while being at the same time supposedly answerable to government bureaucracies running the last but one version of Microsoft Windows (or even XP, for Gods sake).

Or take the finance industry. On the one hand, its banks are global institutions apparently able to move trillions of dollars between continents at the speed of light. High-speed traders spent billions of dollars digging a straight-line trench from Chicago to New York to shave nanoseconds off the time that it takes a buy-or-sell instruction to traverse a strand of glass fibre. On the other hand, it takes five working days to clear a cheque.

Illustration by Matt Murphy.

In a fascinating article in the Financial Times last week, the veteran commentator Martin Wolf turned his gaze on the banks. Information technology, he wrote, has disrupted the entertainment, media and retail businesses and, most recently, the supply of hotel rooms and taxis. Is it going to do the same to finance? My first response is: please. My second response is: yes.

Wolfs reasoning is that banks and insurance companies are our core financial institutions because they do three essential things: enable payments, act as intermediaries between saving and investment and provide insurance. But they dont do any of these things well and mostly they do them with staggering inefficiency. Even today, Wolf says, 40% of the global revenues of the banking system thats $1.7tn come from payments and settlement can take still take hours or days.

So here we have a global industry that, in one of its core competencies, is operating at a pace that Mayer Rothschild, the founder of the great banking dynasty in the 1760s, might have recognised. Could digital technology help? Yes, says Wolf. It could, for example, transform payments using some variant of the blockchain technology that underpins cryptocurrencies such as bitcoin.

Hes right: blockchain technology could make payments nearly instantaneous and at very low cost. Which is presumably why the Bank of England has encouraged some UCL computer scientists to design a cryptocurrency that would combine the affordances of a blockchain system with the control over monetary policy that a central bank would expect to retain. And its also why the governments chief scientific adviser recently published a report extolling the potential of blockchains for streamlining government services.

So here we have an interesting conundrum: with astonishing speed, computer scientists have come up with a truly revolutionary technology that could transform both banking and the provision of public services. I said could. But we will have to wait until we can make blockchain payments every day before we know what the real pace of change is. One funeral at a time, remember.

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Meet the millennials making big money riding China’s bitcoin wave

The cryptocurrency may have no physical form but the returns from trading it can be very real and for some theyre worth giving up your job for

On a sunny afternoon in west Beijing, on the auspicious eighth floor of a nondescript concrete high-rise, Huai Yang sits with the curtains drawn in his apartment, making his own luck.

For the past six months, 27-year-old Yang has worked mainly from home, mainly from his sofa, tracking and trading bitcoin, and watching the money roll in. The flat itself is modestly sized; Yang moved in in his pre-bitcoin days when he worked variously for a crowdfunder start-up, a branding consultancy and dabbled in hedge-fund management, all of which he describes as creative financial work. Now, though, his main focus is bitcoin, which is much younger, more fun, and much more money. Yang claims to make up to 1m yuan (116,000) a month, under the radar of the taxman, purely from trading the online cryptocurrency.

Bitcoin has no physical form but the rewards are very tangible; Yangs home is packed full of expensive gadgetry, most prominently a mega-sized flat screen smart board, over a metre wide, which Yang uses to chart bitcoins rise and fall in HD.

Normally, the graphs on Yangs screen show bitcoins and his own fortunes going up and up. At the time of writing, one bitcoin is worth 6,600 yuan (768) recent months have seen the value hover well above 8,000 yuan. The global worth of bitcoin is over $14bn USD (11.3bn), of which over 90% is in yuan, and Yang and his peers are cashing in. I want a more splendid life, he says.

Huai Yang, who trades bitcoin from his sofa Photograph: Naomi Goddard for the Guardian

Theres certainly big money to be made in bitcoin, but it comes at a high risk. Bitcoin was designed to be a peer-to-peer currency, free from interference from government and central banks. Since the currency was launched in 2009, however, the Chinese market, where government interventions are common, has come to dwarf all others.

One such intervention took place in February this year, when the government warned that there would be serious violations for trading platforms that failed to abide by strict money-laundering regulations. In line with this, OKCoin and, the two biggest exchanges in China, announced that they would be suspending bitcoin withdrawals for one month.

Incidents like these, which Yang sees as not convenient, but not [a] problem, give Chenxing (who asked that I only use his first name) pause for thought. Chenxing, a boyish, skittish 35, has been trading bitcoin for the past four months, after giving up his too comfortable job as a geo-information engineer for the government. The governments pressure on bitcoin platforms is not so easy to understand, he tells me. Im not sure its really about money laundering they try to control [bitcoin], but they cannot.

For Chenxing, its the system itself that is vulnerable: Technology changes every day, he explains. Maybe tomorrow a hacker can find a way to crack bitcoin the security is from mathematics. If you can crack the mathematics, bitcoin is nothing. Thats why, even though Chenxing describes himself as a believer in bitcoin, he doesnt plan to stay involved for the long term.

Its really not a stable thing, he says, both in terms of fluctuating prices and the uncertain technological future of the cryptocurrency. That said, hes still making more money than in his previous government job. In a good month, Chenxing will pocket the cash value of around five bitcoin, which is close to 40,000 yuan, and which Chenxing prefers to have in cold, hard cash.

Chenxing is something of an anomaly in Chinese bitcoin circles, where the general mood is one of evangelical faith in the currencys potential, especially in an economy where the government often devalues the national currency.

Brendan Gibson, 32, is a United States national who has been in China for six years, trading bitcoin for three. Weve barely sat down to talk when Gibson takes my phone and downloads the BTC Wallet app onto it, before transferring me the seeds of my cryptocurrency fortune: 0.0027 bitcoin, worth 2.50, which is the amount that everyone in the world would have if the 21m bitcoin in existence were equally divided up between all 7.8 billion of us. He believes that everybodys aunt or grandma should be using bitcoin.

Brendan Gibson: Im just kind of fed up with the system. Photograph: Naomi Goddard for the Guardian

For Gibson, bitcoin is a way of life. He hopes to be completely bank free in the near future. Hailing from the shady mortgage industry of corporate America, Gibson shares Chenxings distrustful attitude, but is more concerned about private banks than bitcoins technological vulnerability. Im just kind of fed up with the system, he tells me over coffee in a slick caf and co-working space from where Gibson does most of his work remotely.

I dont think economies should be built on inflated numbers, and I think its kind of ridiculous that everybody relies on this inflated number in their bank account when its definitely not there bitcoin and other cryptocurrencies are making it so that we are our own banks, and thats one less things we have to worry about. Gibson owns two companies in China, and as far as possible uses bitcoin for all his daily expenses, converting the personal profits he makes into bitcoin to avoid using banks.

One of the commonly cited weaknesses in the bitcoin system is that if you lose your private key to access your bitcoin wallet, the bitcoin within are lost forever. In 2015, it was estimated that up to 30% of all mined bitcoins had been lost, with a value of 625m. Unsurprisingly, plenty of people see this as an opportunity to make some money.

Sun Zeyu, 27, works at a tech start-up based near Beijings university district that specialises in bitcoin. His latest project is Coldlar, an offline, physical wallet that stores users bitcoin and can be accessed by scanning a QR code. Bitcoin security is a tough question, Sun tells me, which is why he and his colleagues designed a product that allows people to circumvent bitcoin platforms and have even greater control over their bitcoin. Now that the value [of bitcoin] is going up, he explains, people really realise the importance of security.

Before, when we just traded one or two coins, people didnt mind, [but] now the value of bitcoin is much bigger. Sun got involved with bitcoin while at university after attending a seminar run by Huobi, one of the biggest trading platforms in China. Like his flashier friend Yang, Sun wanted money, and lots of it. He wont tell me exactly how much he earns, but assures me that its hundreds or thousands times more than the 10,000 yuan per month he was earning when he first dabbled in bitcoin three years ago.

His money comes from both his trading activity and his company salary. With the growth of bitcoin and related products like his Coldlar wallet, Sun believes that in 10 years time, the value of the cryptocurrency will be one bitcoin, one house in Beijing. Minor shocks to the system, like the recent suspension of bitcoin withdrawals in China, are just like breathing, he insists, and the inhalations of profit dwarf any other bumps in the road.

Sun Zeyu at work. Photograph: Naomi Goddard for the Guardian

Despite the solitary nature of their work, Yang, Sun, Gibson and Chenxing are all sociable creatures. Gibson is connected to hundreds of bitcoin aficionados in China, and has introduced close to 1,000 new people to the technology (although how many are like me, with 2.50 lying dormant in an unused wallet, is unknown), such is his enthusiasm for the cryptocurrency. Chenxing cites the social side of the bitcoin scene in Beijing as one of the main attractions of staying in the industry and the city.

I can meet some fun people who really love bitcoin I think most of the people who like bitcoin are people who like freedom he says. Yang, however, takes a slightly harder-edged approach. He has little patience for sceptics: Yes, bitcoin is a risk. Why should I have to discuss these things with [people concerned about the security]? I earn my money, thats enough. I dont waste my time explaining bitcoin [if] youre not my client. In some ways, Yang concedes, the less people understand bitcoin, the better it is for him. At the moment, the industry is like an ATM for him and his peers, and hes perfectly happy for things to stay that way.

In the fast-changing world of the crypto-currency, nothing seems to stay the same for long. Whether its unpredictable government interventions, or debates within the community about how the industry can and should be scaled, general growth in value thus fair doesnt necessarily suggest anything about the future of bitcoin, despite the faith of its adherents. Gibson makes the point that bitcoin has only been around for nine years; it took PayPal at least 10 to properly catch on.

In Japan it has recently been recognised as legal tender. Its unlikely that the same could ever happen in China, no matter how much its popularity continues to balloon. Chenxing, who has years of insider experience, is sure that [the government] will never accept a thing thats not built by themselves. Many bitcoin traders in China are in it for the long haul, confident that they can ride out any governmental interferences, as long as they have access to the internet. Chenxing, however, is more paranoid. His final thoughts on bitcoin are: I never feel secure.

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Don’t dismiss bankers’ predictions of a bitcoin bubble – they should know

The virtual currencys success reflects the continuing lack of trust in traditional banking following the credit crunch

When the boss of Wall Street’s biggest bank calls a bubble, the world inevitably sits up and listens, albeit with a sense of historically weighted irony: of course an investment bank boss would spot disaster after his industry presided over the last one. Jamie Dimon, the chief executive of JP Morgan, said last week that the ascendancy of the virtual currency bitcoin – which has risen in price from just over $2 in 2011 to more than $4,000 at points this year – reminded him of tulip fever in 17th-century Holland. “It is worse than tulip bulbs,” he said. “It could be at $20,000 before this happens, but it will eventually blow up. I am just shocked that anyone can’t see it for what it is.”

Dimon’s comments are an open invitation for derision from those who, rightly, point out that although JP Morgan may be top of the Wall Street heap, that heap is far from being the moral high ground. Under Dimon’s leadership, it has agreed a $13bn settlement with US regulators over selling dodgy mortgage securities – the instruments behind the credit crunch – and its run-ins with watchdogs include a $264m fine last year for hiring the children of Chinese officials in order to win lucrative business in return.

But it doesn’t make him wrong. Even the most basic description of bitcoin – an intellectual test on a par with describing a collateralised debt obligation – elicits mental images of a digital back-alley shell game. A bitcoin is a cryptographic solution to a complex equation. It is not as recognisable to you or me as a unit of value as, say, a dollar bill or a prize conker. There is no central authority validating the creation of bitcoins – instead, they are recorded on a public electronic ledger called a blockchain. If you regard the Bank of England as an all-powerful insurer for the pound, there is no such institution behind bitcoin.

This lack of a central authority is one of the reasons why Dimon cavilled in such strong terms last week. In the interstices of unregulated finance lurk ne’er-do-wells.

“If you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars,” he said. “So there may be a market for that, but it would be a limited market.”

Hyperbole aside – murderers don’t necessarily need a digital wallet to fulfil their ambitions – Dimon is referencing a well-trailed link between bitcoin and narcotics. The currency is also vulnerable to hackers. Without a backstop central bank, heist victims stand to lose everything, as with the collapse of the MtGox bitcoin exchange in 2014. Taking out a mortgage denominated in bitcoins is not advisable and, luckily for those stupid enough to try it, you won’t find a high street bank willing to underwrite it.

But some of the perceived flaws behind bitcoin that alarm Dimon – no central authority, a public ledger of transactions – point to the foundations of a new financial establishment. In his jargon-busting lexicon of finance How to Speak Money, the author John Lanchester described how the high priests of ancient Egypt controlled agriculture – and by extension the economy – through a closely guarded flood measurement system known as a nilometer that was hidden behind a load of mumbo jumbo. Dimon, a modern high priest, faces a rival value system in bitcoin. It has no temple, no central authority and uses a rubric over which he has no control. In other words, it is an alternative financial establishment, whose popularity is inextricably linked with the ebbing of trust in the global system that was triggered by the credit crunch.

If bitcoin fails, or is discredited, another system will rise to take its place, without the imprimatur of Dimon or his peers around the altar.

First-time buyers beware: this rate rise could just be the start

House owners, and would-be house owners, beware. Change is coming. The majority on the Bank of England’s monetary policy committee against raising interest rates seems huge, confirmed at 7-2 last week. But the language is tightening around the nation’s finances.

Spare capacity in the economy – unfilled jobs and unspent money – is being whittled away more quickly than previously thought and inflation is still likely to overshoot its 2% target over the next three years. Yes, wage growth is running below an inflation rate that has now hit 2.9%, but all signs now point to that 7-2 split flipping the other way come November.

As the Bank said, “some withdrawal of monetary stimulus is likely to be appropriate over the coming months”. This was firmed up the following day by Gertjan Vlieghe, previously the most anti-rise MPC member, when he said the bank was “approaching the moment” for an increase.

Market punters now think there is a 42% chance of a rise in November, and more than 50% in December. The current split on the MPC masks the weighing of trade-offs – between economic growth and inflation, post-referendum stability and curbing consumer debt – which is ever delicate and close to a tipping point.

A rate rise from 0.25% at present to 0.5% will be no disaster and would merely represent a return to the previous record low, which had lasted from 2009 to the EU vote. But what should sharpen borrowers’ minds is the thought of further increases – as hinted by Vlieghe. Inflation remains stubbornly high; something will have to be done to temper a consumer lending surge growing at 10% a year.

Households might cope with a move to 0.5%, but if a rate increase augurs a sustained move against cheap borrowing and persistent inflation, then a wider rethink of ambitions, from getting further up the housing ladder to buying a new car, will be needed. And for those not on the housing ladder, hopes of a step up could be extinguished altogether.

Disney hopes its Star Wars choice will use the force wisely

Disney’s choice of creative talent in recent years has been impeccable, having handed the Avengers franchise to Joss Whedon and employed Lin-Manuel Miranda to co-write the music for Moana. But its decisions over the Star Wars universe have unravelled of late.

The director of Rogue One, Gareth Edwards, was sidelined during reshoots, while the directing duo behind the new Han Solo film, Phil Lord and Christopher Miller, were fired altogether shortly before shooting finished. Most recently, Jurassic World helmer Colin Trevorrow was yanked off the final Star Wars instalment before filming began.

Last week, Disney announced it was handing the final film in the latest Star Wars trilogy to JJ Abrams, the creator of Lost and director of The Force Awakens, the film that launched this Jedi triptych. Abrams is a conservative choice, by Disney’s recent standards. But what the studio needs right now is a safe pair of hands on the lightsaber.

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London finally has a zero-waste and zero-plastic shop

The future of banking fits in the palm of your hand! But is it all that new?
Image: monzo

Banking doesn’t usually inspire chat-up lines in pubs, or nightclub-style virtual queues of young people looking for a quick way in. But one London-based startup has managed to become quite the conversation starter in London’s pubs and beyond. 

Monzo lives entirely on your phone and is geared toward a generation accustomed to doing everything with that device. Unlike many other apps, there’s no waiting until the next day to see what’s left in your account after a big night out, because the balance updates in real time.  

It’s not the only app-based bank out there, nor the only bank challenging traditional institutions. The actual product isn’t wildly different from what you can get at ordinary banks on the high street. “There’s no rethinking of product, not redefining identity,” said expert in emotional banking and Chief Growth Officer at Temenos’ Marketplace Duena Blomstrom

Yet somehow, Monzo has managed to use its distinctive hot coral-coloured card to garner a buzzy, dedicated fanbase who chat to each other on message boards and meet up IRL — which definitely isn’t happening for the old high street banks. And, it’s the startup that’s being lauded as potentially the UK’s answer to American tech behemoths Facebook and Google. 

It once famously crowdfunded a £1 million investment round in 96 seconds, and since its inception in February 2015 it has almost half a million users. All this just with a pre-paid card (current accounts are now being rolled out) and an app. The company reported almost a £7 million loss in it’s last financial year — and while that isn’t entirely unusual in the early years of new ventures, it can be risky for investors. 

Mashable met CEO Tom Blomfield at Monzo’s Shoreditch headquarters on a rainy Wednesday to find out more. The lobby smells like pulled pork from the street food vendor brought in for a twice-weekly employee lunch, and the young coders and designers queue up. 

Monzo CEO and co-founder Tom Blomfield.

Image: Monzo

“From the very early days we wanted to do a couple of things differently. One was involve our community in basically everything,” Blomfield said.

“Second is being really transparent about everything, whether it’s a product road map or around our license application, or plans for the future, or ATM charging. Community and transparency seem to go hand in hand,” he said.

Monzo’s transparency recently came into focus when the company made headlines for taking away a feature that had been there from the beginning — free ATM withdrawals abroad. Some customers were angry and threatened to leave the company over it…

…but other users pointed out that the community had voted for it.

Blomfield seemed to take that as a reminder that there are powerusers, and then there are the casual users, and Monzo can’t just cater to the most engaged. “Even the vote on the ATM fees, you had to register on the community forum, which something like 15,000 people voted, but we have a userbase of half a million now,” he said. The company is looking at ways to bring the community more into the app to remove the barrier of registering on a forum in order to participate.

The fees issue and sporadic outages will put Monzo in the mainstream press but according to Will Beeson, head of operations and innovation at Civilised Bank, Monzo’s continued transparency works in their favour. 

“There’s a level of openness — transparency, openness on how products priced and delivered, and how issues are resolved. With the few outages with the prepaid cards, they’re very quick to put up their hands and accept responsibility,” Beeson said.

While the commitment to transparency underpins everything they do, clever marketing that captures the zeitgeist has really boosted their profile.

“One of greatest challenges for fintech is getting the word out,” Beeson said. “I’ve seen millennials on the Tube — and even more on the Overgound [the main train line in hipster East London] — and it seems like every other person is tapping in and out with a Monzo card,” he said.

“Leveraging social media was really smart. You get the buzz, and other challenger banks playing on that aspect,” said Ghela Boskovich, head of fintech and regtech partnerships at Startupbootcamp.

Monzo’s Golden Tickets don’t look exactly like this, but you get the idea.

Image: REX/Shutterstock

One idea that generates buzz is the Golden Ticket. Normally there’s a waitlist for Monzo, but users can get a Golden Ticket (yes, inspired by Willy Wonka, according to Blomfield) which they can give to a friend to skip the queue.

This Mashable reporter can confirm that the Golden Ticket become a talking point in offices, at the pub, and online. It’s been a big success for Monzo.

“Something like 45% of our signups in any given week are driven by Golden Tickets,” Blomfield said.

Another feature that makes Monzo different is their fluency in emoji.Like other things at Monzo, it came about organically, but people really liked it so it stuck around.

“The emoji crept into our customer support language. That’s how our customers communicate,” Blomfield said.

Uh oh — emoji in action, and a warning.

Image: MONZO

As Blomfield tells it, Monzo co-founder Jonas Huckestein was working on a holiday Sunday afternoon and thought it would be funny to include an emoji on push notifications. So he wrote the code and pushed it out to the 3,000-4,000 users at the time. 

“It was just to sort of amuse people really but it was surprisingly delightful,” Blomfield said.

He spent a few hours going through the Mastercard-supplied list of merchants and matching up the emoji and it has continued from there.

“There are all these little easter eggs. Totally pointless, no economic benefit at all, it’s just sort of lovely. It makes me smile,” he said. There’s no masterlist at Monzo but developers might add custom combinations for places (certainly British pub names are ripe for that kind of thing). 

Not all features are 🔥.  

Blomfield said they had high hopes for the feature — a web link that lets anyone send a Monzo user money. “But it drives maybe a hundred users,” he said. 

Image: screenshot

As Monzo grows, it’s important to continue to appeal to a wide base of customers, and not just the superfans.

“When we do product feedback sessions, we need to make sure these people are a diverse representation of our customer base, and not just tech nerds in Shoreditch. It’s easy to just grab three dudes with dodgy beards off the street and see what they think,” Blomfield said. 

He also said that the original categories for expenses reflected a very male perspective, and that going forward the categories would be more representative of a diverse set of needs.

While all these features seem pretty cool they haven’t yet resulted in a payoff. But Monzo has jumped into the fray at a good time.

In 2015, the European Union issued its second Payment Services Directive (PSD2) regulations, and the UK Treasury took those and just ran with them. On Jan. 13, 2018, nine big banks in the UK must disclose their data to licensed startups. (Wired has an excellent explainer on the topic, if you are interested in reading more.)

With that all that sweet, sweet data becoming suddenly available, of course there are questions of privacy and security. Blomfield is very much aware of this and its importance. He said that Monzo won’t share anyone’s data unless they want them to.

“But there might be times when it might be advantageous to do so like for a gas or electric switching site, so you can get a better deal. So we always try to give you that choice, that opt-in, and if you don’t opt in we won’t share your data,” he said. But he said that what happens to your data after it’s shared with another party is basically in their hands.

“It’s easy to just grab three dudes with dodgy beads off the street and see what they think.”

The Monzo machine got in the game early, and it’s in a good position to capitalise on this sea change in banking data. When asked if Monzo has the potential to be a Facebook or a Google, Startupbootcamp’s Boskovich points to the data.

“The user is really engaged with the app. It collects enormous amount of data, like Facebook and Google collect data. Monzo also sees the transaction and can overlay it with behavioural data,” she said. 

“But the regulations under PSD2 and General Data Protection Regulation (GDPR) are still going to apply to Monzo, the same way as it would apply to anyone else,” she said.

So will Monzo and its crowdsourcing superfans get rich off the incoming treasure trove of personal data? Will it get absorbed into a Google or a larger bank? Will customers get tired of chatting about their brightly coloured bank cards and the relevant emoji on their push alerts?

It definitely feels like an exciting time to be in banking (who would’ve thought?) and we’ll see if the future comes up hot coral. 

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