Monzo · Strategy · Mid · 45 to 60 minutes

How should Monzo redesign overdraft pricing?

Monzo is a UK digital bank that offers current accounts, cards, and borrowing products through a mobile app. Answer this product management case and get it graded line by line against a weighted rubric.

Product strategy
Customer empathy
Pricing judgment
Risk management
Written communication

The situation

The head of borrowing asks you, the PM for overdrafts, for a recommendation on how Monzo should redesign overdraft pricing before new UK rules take effect. Today, overdrafts use a fixed daily fee structure. Regulators are changing expectations around overdraft charging, and the current model may soon be non compliant or hard to justify. At the same time, overdrafts are a trust sensitive product: some customers use them occasionally as a backup, some rely on them more heavily, and any pricing change could hit financially stretched users and trigger negative press. Customer feedback also suggests the current experience is not ideal, including questions about limits and confusion about what borrowing will cost. You need to propose a strategy that is fair, commercially viable, simple to explain, and feasible to ship before the regulatory deadline. Assume you can use directional internal data on overdraft usage, complaints, and credit risk, but you do not need to compute a full pricing model. The leadership team wants a clear recommendation, the rationale, and a customer communication approach that protects trust.

What to produce

Write a 1 to 2 page strategy memo.

Your answer must

State your recommended overdraft pricing approach and why it fits the new rules, customer needs, and the Monzo brand.
Identify at least two customer segments that would be affected differently, and explain how you would estimate customer impact in pounds per month, not only rates or percentages.
Describe how limits and eligibility should be handled alongside any pricing change, and why.
Outline a communication and rollout plan, including when customers are told about changes and how they learn their likely cost before borrowing.
Define success metrics, guardrails, and the top risks with mitigations.

Constraints

Your recommendation must comply with upcoming UK overdraft regulation and be explainable in plain English.
Do not assume a new lending product or a long rebuild of Monzo's credit systems before launch.
Your plan should minimise harmful surprise charges for existing overdraft users.

Format

Use headings: recommendation, customer impact, options considered, rollout and communication, metrics and risks.

How Monzo actually played it

Responding to new UK rules, Monzo moves from a fixed daily overdraft fee to a personalised rate of 19, 29 or 39 percent EAR based on credit score. The post says 87 percent of people will be better off or see a change of less than one pound a month, raises limits up to 3,000 pounds, and removes a free buffer. A model for communicating a pricing change with impact figures.

Quantify the effect of a pricing change on customers (87 percent better off or nearly unchanged).
Pair a regulatory-driven change with improvements customers asked for, such as higher limits.
Show the cost in pounds, not just a percentage.
Give a firm date and tell people their rate before they borrow.

Built from Our overdrafts are changing by Monzo.