Monzo, the London-based digital bank, has successfully raised a new round of funding totalling $430 million. As a result, the fintech’s value has been raised to $5 billion. The recent funding round was led by Alphabet’s CapitalG investment fund, and received contributions from HongShan and other existing backers like Tencent and Passion Capital.
The refreshed valuation outstrips the $4.5 billion valuation the company secured in 2021, from investors such as Tencent and the Abu Dhabi Growth Fund. This indicates a positive momentum, despite the downturn many other start-ups are experiencing owing to rising interest rates and diminished investor confidence.
Monzo’s CEO, TS Anil, affirms that the company is pioneering the evolution of banking. He regards it as a race to revolutionize the customer’s interaction with their money, stating that Monzo is in a prime position to be successful at a global level.
The round of funding, Anil says, was driven by methodical global tech investors. Thanks to the strong investor interest throughout last year, the company chose to solidify this towards the year’s end.
The additional capital provides Monzo with the means to penetrate the US market, which experienced a setback previously in 2021 when it was indicated the firm would not obtain a banking licence. Now, the fintech plans to venture back into the US via a banking partnership, negating the need for a licence application.
Anil also intimated later growth plans for the European markets, such as Germany and France. He argued that banking holds vast revenue opportunities and that customer dissatisfaction in Europe is ripe for innovative disruption.
The recent financial round signifies a dramatic change in fortunes for the start-up, widely recognised for its vivid pink banking cards. Throughout 2020 and 2021, as revenue from card transactions fell due to the pandemic, its auditors raised concerns about the company’s sustainability. Concurrently, the Financial Conduct Authority initiated an investigation into possible violations of anti-money laundering laws.
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Monzo, ahead of tax deductions, made a loss of £116 million (€136 million) in 2023, predominantly because of an increase in loan impairments resulting from the rapid expansion of its “buy now, pay later” service. Nonetheless, CEO Anil anticipates making a profit this year.
Even though the $5 billion valuation significantly lags behind the $33 billion figure attained by UK competitor Revolut in 2021, Monzo has been steadily managing its challenges and holds a full banking licence. In contrast, Revolut is currently wrapped up in a drawn-out and disruptive issue endeavouring to secure a licence from UK regulatory authorities.
Anil stated that it is premature to discuss a prospective public offering’s timing or location. This is a highly debated area in the UK, as numerous start-ups valued over £1 billion have chosen to go public in the US, where market liquidity exceeds and valuations are frequently higher.
The CEO -This post was taken over by him from founder Tom Blomfield when he resigned in 2020 – mentioned that Monzo has been solicited by smaller competitors for possible acquisition.
“Operating from a position of strength, our organic strategy is working. However, we are receptive to mergers and acquisitions,” says Anil. This report is copyrighted in 2024 by The Financial Times Limited.
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