Monzo is stepping outside of banking and into mobile. The UK challenger bank announced plans to launch an MVNO (mobile virtual network operator), offering customers digital SIMs and mobile plans.

At first glance, a bank selling phone contracts might sound like a stretch. But for Monzo, it’s part of a bigger theme: service diversification. Fintechs are looking for new ways to grow, reduce reliance on thin-margin banking products, and deepen customer relationships.

The move raises an important question for every fintech founder: when does diversification work, and when does it backfire?

Why fintechs branch into telecom

Diversification is not new. Revolut offers eSIMs with global data. Klarna launched a U.S. mobile plan. N26 partnered with 1GLOBAL to sell travel-friendly eSIMs. Nubank has “NuCel” in Brazil. Even Google and Amazon have experimented with mobile bundles.

So why is telecom attractive for fintechs?

• Customer stickiness. People interact with their mobile plan daily. If it’s tied to your app, customers open it more often — boosting engagement.
  
  
• Cross-selling. If you already have millions of users (Monzo has 12m+), you can market a new service cheaply to your base.
  
  
• Subscription revenue. Mobile plans bring predictable monthly income, compared to interchange fees or lending.
  
  
• Differentiation. In a crowded neobank space, “we also run your phone service” makes you stand out.
  
  

In other words, it’s not really about telecom — it’s about becoming a one-stop digital hub for your customers’ daily life.

When diversification works

Diversification isn’t about chasing shiny objects. It works when:

• You solve a real pain point. Monzo didn’t pick mobile randomly; customers told them contracts were confusing and overpriced. That’s the same logic that drove fintechs into banking in the first place.
  
  
• You have a large, loyal base. Without scale, margins in telecom are brutal. Monzo, Revolut, and Klarna can play because they already have millions of engaged users.
  
  
• You partner smartly. Modern MVNO enablers (like Gigs, 1GLOBAL) handle the heavy telecom infrastructure. Fintechs can focus on UX and integration.
  
  
• You stay aligned with your brand promise. If your brand stands for simplicity, transparency, or travel-friendliness, your diversification should reinforce it.

When it doesn’t

Plenty of non-telcos have tried launching mobile services — and failed. Disney Mobile, ESPN Mobile, even Amazon’s Fire Phone all flopped. Why?

• They didn’t solve a clear user problem.
  
  
• Margins were too thin without scale.
  
  
• The move distracted from their core business.
  
  
• Customers didn’t see enough reason to switch.

For fintechs, the risk is the same. Diversification can dilute focus, drain resources, and hurt brand trust if the new service underdelivers.

Key takeaways for fintech startups

Monzo’s MVNO launch offers a few clear lessons for founders thinking about diversification:

• Start with pain points. Diversify only if you’re solving something your users already struggle with.
  
  
• Leverage your base. Cross-sell to existing customers first; don’t assume strangers will switch just for a bundle.
  
  
• Pick the right partners. Use platforms to enter new verticals quickly instead of reinventing infrastructure.
  
  
• Time it right. Diversification is easier once your core product is stable and scaled.
  
  
• Be ready for telecom-style economics. Thin margins, high support costs, and brutal competition are part of the deal.

The founder’s lesson

Diversification is tempting, especially when investors push for new revenue streams. But it works only if it strengthens your ecosystem rather than distracting from it.

Monzo is betting that mobile will make its app more central to users’ lives. If it works, it could be a playbook for others. If not, it will be another reminder that chasing too many verticals too soon can stretch even the best fintechs thin.

Your Fintech Story helps founders navigate these choices — when to diversify, how to build a scalable strategy, and how to keep growth on track. If you’re thinking about your own “Monzo moment,” get in touch and let’s explore it together.