Fintech News

British Neobank Monzo Increases Investment Round To $610 Million To Breach U.S. Market

Monzo, a British neobank, announced today that it has raised a further $190 million, bringing its total fundraising this year to $610 million.

TakeAway Points:

  • Neobank Monzo, a British company, said that it has raised an additional $190 million from investors, which includes Alphabet’s independent growth fund CapitalG and Hedosophia.
  • With this latest round of fundraising, Monzo has raised $610 million altogether this year, valuing the company at $5.2 billion after debt.
  • The CEO of Monzo, TS Anil, said that his company intends to utilise the money to develop new products and expedite its plans for worldwide expansion.

Monzo Boosts Funding

According to the report, the business stated that it had secured funding from new investors, among them Hedosophia, a supporter of prominent European fintechs such as N26 and Qonto. Alphabet’s separate growth fund, CapitalG, took part in the deal as well.

GIC, a Singaporean sovereign wealth fund, took part in Monzo’s most recent fundraising as well, a person with knowledge of the situation told CNBC. The source requested to remain anonymous because GIC’s involvement details are currently under wraps.

Monzo’s current funding puts its valuation at approximately $5.2 billion, up from the $5 billion it reached in March after raising $430 million. Based on data from Dealroom, the $610 million investment is the largest funding round that a European fintech has had in the previous year.

TS Anil, CEO of Monzo, said in an exclusive interview that his company intends to utilise the money to develop new products and expedite its plans for worldwide expansion.

“At the heart of it, we are a mission-oriented company that’s looking to build a single place where people can meet all of their financial needs,” Anil said.

“What’s exciting to me is that, as we pursue that mission of changing people’s relationship with money, we’ve built a business model that is congruent with that as well, with this model that is built entirely around the customer.”

After its 2023 fiscal year ended, Monzo achieved profitability and went into the black for the first time last year. According to Anil, Monzo wants to increase profitability by expanding into different revenue streams, like savings and lending.

Anil revealed that Monzo intends to release its first pension product within the next six to nine months.

It would then face competition from established lenders such as NatWest and Barclays. NatWest paid £144 million ($180 million) to acquire 85% of U.K. workplace pension services business Cushon last year.

Plans for worldwide growth

The nine-year-old company, which already has over 9 million retail clients in the UK (two million of whom joined Monzo last year alone), as well as over 400,000 business customers, has a busy year ahead of it with the funding growth.

Monzo debuted in the investment space last year when it introduced a tool that let users contribute to funds run by BlackRock.

According to Anil, Monzo found that almost one-third of users had never made an investment before. What is more, 45% of female users who make investments using the Monzo app are first-time investors.

In the upcoming months, Monzo will place a high premium on foreign expansion.

After previously abandoning a deal to acquire Acquo, the firm recently resumed its U.S. expansion efforts, appointing a seasoned executive from Block’s Cash App as its new U.S. CEO. The team in the U.S. is largely focused on the product to ensure that the service receives a banking licence from U.S. regulators.

According to Anil, Monz currently possesses sufficient quality to rival established players like JPMorgan and Citibank. Neobanks from Europe have a notoriously hard time breaking into the U.S. market.

Notably, Berlin-based digital bank N26 left the United States in 2021.

Revolut, on the other hand, has stated it plans to submit a draft application for a U.S. bank licence but has not yet officially filed an application for a U.S. bank charter.

“What I like about how we’re approaching this is that, at the heart of it, it’s not just words. The necessary conditions for the U.S. for us are getting the product right. That’s what we’re spending our time and effort on there.” Anil said.

Anil stated that they plan to expand into Europe, although he did not provide a timeline for this.

Monzo’s Mortgage Product

In the long run, Monzo intends to introduce a mortgage product, which would enable it to compete far more fiercely in the lending market with retail banks in the UK.

Currently, Monzo’s app provides consumer loans and monthly installment plans.

Additionally, it features a “Mortgage Tracker” feature that allows users to monitor the amount of equity they have built and the amount they have paid towards their mortgage.

But it’s yet to officially roll out a service that would let people apply for mortgages directly within its app.

According to Anil, Monzo is currently investigating joint ventures with lenders in order to provide this.

An IPO is one thing Monzo does not currently have any intentions to do.

Monzo will make a “wonderful public company one day,” in Anil’s opinion, but for now, it is too soon to discuss an IPO. Prioritising Monzo’s large-scale growth before attaining that goal, he claims.

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