Monzo and Fair4All Finance have partnered to widen access to credit for people excluded from mainstream lending, with the agreement centred on Monzo’s Flex Build card for customers with low or limited credit scores.
Fair4All Finance will provide a partial lending guarantee of up to £7 million to help Monzo expand a pilot of the product. More than 16 million adults in the UK face barriers to borrowing, up about 30% since 2018, according to the organisations.
Monzo introduced Flex Build as an extension of its Flex credit offering for people with weaker or limited credit histories. Under the pilot, customers make a one-off deposit that unlocks a credit limit of up to £250.
The structure is designed for people who may not qualify for standard credit products. Customers can build a repayment record over time and move towards mainstream lending if they keep up with payments, Monzo said.
The card offers 0% interest when balances are paid in full at the end of the month, or a 39% APR when customers spread the cost of a purchase. Each transaction is repaid over a fixed term of one to 24 months, rather than rolling indefinitely as with some traditional credit cards.
Customers start with a limit of up to £250, which can rise to £500 after regular on-time repayments. Monzo also said the product shows borrowing costs in pounds and pence, charges no fees for early or late repayments, and freezes spending if repayments are missed while giving customers a seven-day grace period to catch up without affecting their credit score.
Access gap
The move comes as access to affordable small-sum credit becomes a growing focus for policymakers and lenders concerned about financial exclusion. People refused mainstream credit often turn to family and friends, overdrafts or unregulated lenders, adding pressure without helping them build a stronger credit profile.
Fair4All Finance, a not-for-profit organisation focused on financial inclusion, has selected Monzo as the first partner for its Small Sum Lending Pilot. The initiative is part of the Government’s Financial Inclusion Strategy and is intended to encourage more lenders to offer products for people underserved by the market.
The pilot will be used to gather evidence on whether the model can serve this customer group on a sustainable basis. The organisations also plan to share findings with policymakers, regulators and other lenders.
Kate Pender, Chief Executive Officer of Fair4All Finance, said the programme would be a significant test of whether a mainstream bank could expand access to affordable borrowing for customers often shut out of the market.
“The launch of this pilot is an important moment for financial inclusion in the UK as Fair4All Finance and Monzo work together to improve access to affordable credit for those who are often shut out. By partnering with Monzo we are able to scale up a product with the potential to serve thousands more people, backed by a robust guarantee structure. This is the first step in delivering on the Government’s ambition to improve financial inclusion in the UK through a large-scale partnership with a mainstream bank, and we look forward to working with Monzo on this. We also look to the evidence from the United States, where six of the eight largest banks deliver an equivalent product at scale, and we encourage the rest of the UK banking sector to come forward and work with us to deliver new products and solutions to improve access to credit through small-sum lending,” said Pender.
Product design
The app also includes educational prompts and progress markers intended to encourage regular repayment behaviour. Customers who maintain repayments can reclaim their original deposit as they move towards standard lending products, according to Monzo.
The design reflects a wider industry effort to find alternatives to high-cost credit and overdraft use for consumers with thin or impaired credit files. Small-sum products have drawn attention as a possible way to help people manage emergency spending while creating a track record with mainstream lenders.
Luke Enock, General Manager of Borrowing at Monzo, said the bank was trying to address a gap that leaves many people unable to cover essential costs or improve their future borrowing prospects.
“Our mission is to make money work for everyone, which means breaking down the barriers to financial progress. Too many people can’t access affordable credit, leaving them unable to manage essential costs or build the repayment history needed for future borrowing. With Flex Build, we’re introducing a new kind of credit product that helps people build a credit history and progress to mainstream options over time. By partnering with Fair4All Finance, we’re reaching thousands more excluded customers, taking a vital step towards a more inclusive credit system in the UK,” said Enock.
The Treasury has identified access to responsible credit as a central element of its financial inclusion agenda. The pilot is one of the early market tests linked to that approach and will be watched by lenders assessing whether similar models can work at scale.
“Improving access to responsible credit is a central part of the Government’s Financial Inclusion Strategy and this pilot marks strong early progress in delivering on that ambition. Monzo’s participation is an important step forward, helping to test what role mainstream lenders can play in supporting currently underserved consumers to manage unexpected costs and build financial resilience. I welcome Monzo’s leadership in this space, alongside Fair4All Finance’s work to test practical solutions that can be scaled over time,” said Rachel Blake MP, Economic Secretary to the Treasury.
Fair4All Finance said the guarantee structure is intended to share part of the lending risk with Monzo as it reaches customers with low or limited credit scores.
“We are delighted to work with Monzo to structure a partial lending guarantee that enables it to serve more customers, with the potential to widen access to credit for thousands of people. It’s a brilliant example of what public-private partnership can look like in amplifying social impact,” said Diana Kamil-Salmon, Associate Director of Commercial Propositions at Fair4All Finance.
