The surge of digital-only neobanks such as Revolut and N26 has posed a significant threat to traditional banking institutions, a phenomenon unimaginable two decades ago. Monzo, a key player in the UK, has invested €4 million into its operations in Ireland, assembling a top-tier board in preparation for utilizing its Irish base to spread further into Europe. Monzo has already made a mark in its home country and has recently achieved a valuation of approximately $5.9 billion (€5.4 billion) following a staff share sale – a step up from its $5.2 billion valuation earlier this year. This illustrates the overwhelming investor appetite to be involved in the fintech industry. Existing investors such as StepStone Group and Singapore’s GIC participated in the round, as reported by Bloomberg News. While Monzo’s valuation is quite modest compared to Revolut’s $45 billion, their ambitious expansion plans for Europe and the US suggests this figure could surge. The journey is not without its pitfalls, as exemplified by digital banking competitor Starling Bank. Despite rapid growth, the company, established by the ex-AIB COO Anne Boden, encountered significant issues recently, receiving a £29 million (€34 million) fine from the UK’s FCA due to severe shortcomings in their anti-money laundering measures.
The report provides a stark analysis and underscores the challenges faced during the establishment of a start-up in a rigorously regulated sector such as banking, where the regulations are completely justified. The primary attraction for investors and what keeps a start-up afloat, is steady growth.
However, when it pertains to financial services, growth cannot be achieved at all costs. It’s a universal understanding amongst industry professionals that balancing targets with control measures can prove to be a challenging task. Thereby, prosperous neobanks are those that effectively manage these inevitable tensions.