Monzo Raises $190 Million

British neobank Monzo on Wednesday, May 8, announced that it had managed to raise investments for $190 million.

Monzo Raises $190 Million

As a result of receiving the mentioned funds, the total amount of money raised by the specified financial institution operating in the virtual space has reached $610 million since the beginning of the current year.

Hedosophia, a backer of leading European financial companies, including N26 and Qonto, was one of those provided investments for $190 million to neobank. Alphabet’s independent growth fund has also joined another round of financing for the digital lender.

Moreover, the Singapore sovereign wealth fund GIC became a participant in the mentioned process. It is worth noting that the relevant information was published by the media, referring to an anonymous insider. GIC’s participation in the funding round is still a kind of confidential data that is not subject to dissemination in the public plane. The Singapore fund declined to comment on the relevant issue.

According to preliminary information, Monzo is currently valued at about $5.2 billion. It is worth noting that in March the corresponding figure was $5 billion. At that time, the digital financial institution raised an investment of $430 million.

Dealroom data shows that the total amount of external funds for $610 million received by Monzo since the beginning of 2024 is the largest in the last year for the European fintech sector.

TS Anil, CEO of the digital bank, said during a conversation with media representatives that the lender plans to use raised investments to carry out new product development activities and financially support the implementation of efforts to expand its business internationally. According to him, Monzo is a company focused on fulfilling its mission, which is to build a single place where people can meet all their financial needs.

TS Anil also stated that he was pleased that neobank, following the goal of changing people’s relationship with money, was able to form a business strategy that also contributes to solving the relevant task and at the same time is fully customer-oriented.

Last year, Monzo recorded profitability for the first time. In this case, the fiscal year 2023 is meant. TS Anil says that neobank plans to increase profitability by diversifying through other sources of income, including lending and savings.

For fiscal year 2023, Monzo recorded a net operating income of 214.5 million pounds ($266.1). At the same time, the losses of neobank for the corresponding period amounted to 116.3 million pounds.

The CEO of Monzo also said that in the next six to nine months, the virtual financial institution plans to launch its first pension product. After this solution is offered to a wide consumer audience, neobank will significantly strengthen its competitiveness indicator in terms of the opportunity to present an alternative to the services of traditional lenders on the market, including, for example, Barclays and NatWest. It is worth mentioning that last year NatWest acquired an 85% stake in the British workplace pension provider Cushon for 144 million pounds.

The expansion of Monzo’s funding has capped a busy year for the nine-year-old neobank. The virtual financial institution currently serves more than 9 million retail customers in the United Kingdom. It is known that 2 million of the mentioned consumers began interacting with the neobank last year. The number of business clients of the virtual financial institution currently stands at more than 400,000 people.

Last year, neobank began investing for the first time using a feature that provides consumers with the opportunity to direct financial injections into funds managed by BlackRock.

TS Anil says that Monzo found out that about a third of the clients of the mentioned service had never been involved in such operations before the neobank offered them the functionality of implementing investment activities.

Currently, the virtual financial institution is paying significant attention to the implementation of efforts to expand the scale of its business at the global level. Neobank has resumed expansion in the United States. As part of the related activities, a long-time executive of Block’s Cash App was hired as the new CEO in the US after abandoning a bid to acquire a banking license from local regulators.

TS Anil says that currently the team of specialists of the virtual financial institution, which is based in the United States, is primarily focused on the product. The corresponding priority is aimed at ensuring a high level of quality of services provided to consumers. The successful implementation of these efforts will allow Monzo to strengthen and improve its position in the US financial services market in terms of its ability to compete with such world-class banking giants as JPMorgan and Citi.

It is worth noting that many years of experience show that it is extremely difficult for European virtual creditors to become active and significant players in the relevant industry in the United States. In this case, attempts to master the US financial space mean something like the inevitability of super-efforts with an uncertain result, which in some situations may even belong to the category of the impossible. For example, digital bank N26 with its head office located in Berlin, was forced to stop its business in the United States in 2021.

Revolut, a financial technology company based in London, announced its intention to formally apply for a banking license in the United States. So far, no actions have been taken towards the implementation of the relevant plan.

TS Anil stated that he likes the fact that Monzo’s approach to business planning in the United States is based not only on words. According to him, getting the product right is a prerequisite for neobank in the US. TS Anil stated that this is what the virtual lender spends its time and effort on. Moreover, he noted that for Monzo, an important task is also to expand the scope of its activities in Europe. At the same time, TS Anli did not specify the relevant plans of the virtual financial institution.

In the long term, Monzo plans to launch a mortgage product with which neobank will strengthen its ability to compete with retail lenders in the United Kingdom. Currently, the financial institution offers its customers monthly installments and consumer loans through its app.

The Monzo digital platform also has a feature that allows users to track how much they have paid for a mortgage and how much equity they have managed to build. However, there is still no service in the neobank app that would allow consumers to apply for a mortgage. TS Anil stated that Monzo is currently in the early stages of exploring the possibilities of partnering with other lenders to offer customers the mentioned solution. He did not name specific banks, interaction with which is considered as a potential option.

As for the list of Monzo’s plans for the near future, in this case, an important circumstance is the absence of any intentions related to the initial public offering (IPO) of shares. At the same time, TS Anil stated that, in his opinion, at some point, neobank can become a great public company. In this case, there are arguments on the topic of what theoretically can be, but so far does not belong to the category of plans for the near future. According to TS Anil, it is too early to start a substantive consideration of the listing of Monzo securities. He is currently focused on growing a virtual financial institution. Only after the full implementation of these efforts will the right moment come to think about an IPO.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.