Report: Who's Using Crypto, How & Why

Monzo Loses £114m, Discloses Money Laundering Probe

Hey all, Jason here.

I know, I know, another week about crypto. Consider this the last installment (for now!). I commissioned and ran a survey panel to better understand how and why consumers use crypto, with some interesting, surprising, and occasionally worrying results.

Also, check out the latest edition of “Fintech Nerd Collective,” answering the question, What are the most successful examples of fintechs breaking down geographic barriers?

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Monzo Annual Report: £114m Loss, Money Laundering Probe

Auditors Warn of “Material Uncertainty” Over Ability to Remain a Going Concern

One-time UK neobank darling Monzo released its 2020-2021 annual report last week, and it wasn’t great news.

Losses were flat at £114m vs. the year prior using the company’s preferred measure, though they rose to about £130m including some non-recurring items.

COVID saw Monzo users cut spending, especially abroad, crimping interchange income, a key revenue source. Like many other banks, Monzo saw customer deposits rise significantly to £3.1Bn, but slowed lending during COVID, originating just £47m in loans, down from £71m in the year prior.

CEO TS Anil said Monzo plans to raise more capital this year, prompting a warning from auditors Ernst & Young for the second year in a row about the firm’s ability to remain a “going concern.” Monzo has raised £170m since the start of the pandemic and has seen its valuation drop by 40% to £1.24Bn.

The annual report also disclosed a recently opened investigation by the UK Financial Conduct Authority over potential weakness or failures of Monzo’s anti-money laundering controls.

Research Report: Who’s Using Crypto, How, and Why?

Although consumer interest in crypto seems to be moderating after reaching a fever pitch this May, it undeniably remains a top-of-mind area for users, financial services providers, and regulators.

With crypto functionality increasingly showing up in “TradFi” consumer apps like Venmo/Paypal, Cash App, and Robinhood, I wanted to get a better understanding of how and why consumers are using cryptocurrency.

The following data is based on a survey panel I ran via Pollfish on July 29th. Respondents are invited using a double opt-in and surveys are embedded and conducted via partners’ mobile applications. Read more about Pollfish’s methodology here.

In order to narrow the survey to those active in cryptocurrencies, I asked users to describe their use of cryptocurrencies, such as Bitcoin, Ethereum, Dogecoin, Tether, and USD Coin, in the past three months, and screened out users who responded that they hadn’t bought, sold, traded, or owned/held cryptos during that period:

A total of 2,235 respondents completed the screening question, with about 45% indicated they had actively traded cryptos or owned them without trading in the preceding three months. This is considerably higher than other surveys, which peg the percent of the total US population using crypto at 13-17%, or about 46 million Americans, depending on the survey.

My suspicion is that the sampling frame (adult mobile users of apps that deliver the survey) skews toward respondents more likely to be tech-savvy early adopters, thus potentially overstating crypto penetration. That said, the focus of the survey is attitudes and behaviors of those engaged in crypto, so the possible sampling bias is less problematic.

The following data are based on the 1,000 respondents that screened in to the survey by answering that they actively traded or held crypto in the previous three months. Response data is weighted by gender and age to match US population distribution.

Looking at crypto usage segmented by gender reveals an interesting though perhaps unsurprising split of who is actively trading vs. owning and holding. Men appear somewhat more likely to actively trade vs. women, which is true in traditional equities as well.

Looking at what platforms consumers use to trade crypto reveals that many users engage with more than one platform, with Coinbase, Venmo/Paypal, and Cash App among the most popular.

There is little variation of platform preference by income, with the notable exception that those earning less than $50,000 skew towards Cash App; this isn’t surprising, given usage of Cash App’s core P2P payment functionality also skews lower income.

When asked how interested they would be in a traditional bank offering crypto features, respondents overwhelming expressed interest in such an offering, with 77% indicating some level of interest, and 31% indicating the highest level of interest:

When asked how they’re funding their crypto purchases, most respondents expressed they did so either out of their monthly budget or from using savings, with some variation by income.

Worryingly, overall, 29% indicated they had used a credit card, took out a loan, or borrowed from friends/family to make their crypto purchases:

By far the most important feature when choosing a crypto platform was ease of use, though cost and the ability to earn yield on held crypto also ranked highly. Anonymity/Privacy was the lowest ranked consideration, cited as most important by just 8.5% of respondents:

Looking at the specific coins bought, sold, traded, or held reveals that Bitcoin remains the most popular, but that most respondents have traded more than one type of crypto, with Ethereum, Dogecoin, and stablecoins Tether and USDC also popular:

When asked the primary reason why they bought, sold, traded, or held crypto, most said they viewed it as a long-term investment, though motivations varied somewhat by income:

When asked about using advanced trading products/features, like margin, futures, and options, a surprisingly large proportion of respondents indicated they had used these.

This result struck me as odd, given that the most easily accessible platforms like Cash App or Venmo/Paypal don’t offer these features, but could also be an artifact of the sampling frame (eg, savvy early adopters using multiple crypto apps).

Those with incomes over $100,000 indicated a greater tendency to use leverage, futures, and options:

Looking at where users are gathering information that drives their buying, selling, and trading decisions, most users leverage more than one platform, with YouTube, websites, and friends/family the most popular information sources:

Finally, when asked on their overall outlook on cryptocurrency in general over the next three months, respondents’ sentiment was generally very positive, with about 26% indicating the highest level of optimism:

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