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Monzo Valuation Hits $5 Billion After Latest Funding Round

Last Updated March 7, 2024 9:35 AM
Giuseppe Ciccomascolo
Last Updated March 7, 2024 9:35 AM

Key Takeaways

  • Monzo raised $430 million to fuel its U.S. ambitions.
  • Alphabet’s venture arm is among new investors.
  • Is this new funding round enough to compete with Revolut?

Monzo made waves with the announcement of its latest funding round, securing fresh capital at a valuation that would make even established banks blush with envy.

As one of the leading app-only banks in the UK, Monzo revealed that the new funding injection will fuel its ambitious expansion strategies. While Revolut still holds a higher valuation, the recent funding rounds signal a notable surge in investor interest in digital banking platforms like Monzo, underscoring the growing prominence of this sector

Monzo Funded By Alphabet’s Venture Arm

British digital bank Monzo successfully secured $430 million in fresh capital from investors, earmarked to support its upcoming relaunch in the United States.

This new funding round was spearheaded by CapitalG, the independent venture arm of Google’s parent company, Alphabet. Additionally, the round saw participation from HongShan, the Chinese venture capital firm that recently parted ways with Sequoia Capital, as well as continued support from existing investors Tencent and Passion Capital.

Monzo total assets
Total assets of Monzo l Source: Statista

Monzo’s CEO, TS Anil, said : “With backing from global investors, we have the rocket fuel to go after our ambitions harder and faster, building Monzo into the one app that sits at the centre of our customers’ financial lives. Each milestone we’ve reached to this point has given us more strength and speed to make strides towards our mission. Now, we’ll scale to even greater heights and seize the huge opportunity ahead.”

U.S. Expansion Next Goal

Monzo, renowned as one of the United Kingdom’s premier app-only banks, has announced plans to use its latest funding injection to speed up its expansion initiatives. Anil told  the Financial Times that this infusion of capital would enable Monzo to penetrate the highly coveted US market. This is a venture previously hindered by regulatory obstacles.

A significant portion of the new funds will help the relaunch of Monzo’s services in the US. In 2019, Monzo attempted to enter the US market with a beta product in collaboration with Sutton Bank. Despite aiming for a full banking license, regulatory hurdles led to the project’s halt in 2021.

Nevertheless, Monzo persists in its US market pursuit through strategic partnerships, bypassing the need for a full banking license. In 2023, the company began  its search for a US CEO, appointing Conor Walsh from fintech firm Block’s Cash App division in October 2023.

Monzo’s recent funding round follows a period of concentrated focus on expanding its product offerings. Notably, in 2023, Monzo ventured into investment products by introducing investment pots. It enabled customers to allocate their funds across various BlackRock-managed funds with varying risk profiles.

Reflecting its continued growth and popularity, Monzo currently boasts over 9 million retail customers in the UK., with a noteworthy addition of two million clients in 2023 alone. Additionally, the bank caters to around 400,000 business banking customers, underscoring its position  as a formidable player in the financial services sector

Revolut Is Still Far

Monzo’s valuation falls significantly short of the impressive $33 billion achieved by its British counterpart, Revolut, in 2021. This stark contrast can be attributed to Monzo’s reliance on interest-based revenue. This constitutes approximately half of its income, derived from both its cash reserves and loans extended to customers. However, with central banks anticipated to reduce interest rates this year, this revenue stream is expected to face a downturn.

Revolut’s revenue model relies heavily on transaction fees from currency exchanges, cash withdrawals, subscription fees, and commissions from crypto trading. This diverse income stream drives its strong financial performance and impressive valuation.

Since its 2015 launch, Revolut has grown rapidly, with 6,000 employees and 25 million customers. With a vision to be the go-to “one app for all things money,” Revolut aggressively expands its offerings. These include cryptocurrency trading and international transfers, earning it the title of a disruptive “neobank.”

In 2021, Revolut achieved a remarkable milestone, attaining a valuation of $33 billion, a testament to its meteoric rise and widespread impact. Furthermore, earlier this year, the company celebrated its inaugural year of profitability. This marked a significant achievement in its journey towards financial sustainability and long-term success.

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