UK Fintech Bank Monzo Doubles Its Value In Latest Investment Round

The UK has a now thriving fintech scene that includes increasingly global names such as Oaknorth, TransferWise and Revolut as well as online-only bank Monzo. And it is the latter that has grabbed the headlines this week after it raised £113 million from investors at a new valuation of more than £2 billion, catapulting the company into the big leagues.

There have been recent grumblings that much of the interest in the sector is based on hype and fintechs that compete with traditional banks on financial services such as current accounts, international transfers and currency conversion at much more favourable rates have yet to show they can actually make a profit. But investors appear convinced that with scale fintechs such as Monzo will give them a return on their investment.

Monzo’s most recent investment round was led by the respected Silicon Valley-based Y Combinator Continuity Fund and means the valuation it can now command has increased by more than 100% since last October when it last raised money. Monzo’s early investors bought in at a valuation of £8 million almost exactly four years ago.

When Monzo was established in 2015, its founding team had all previously worked at Starling, another app-based current account, international transfer and currency conversion fintech that is a direct competitor. Over the four years since, having obtained a banking license in April 2017, Monzo has managed to attract two million current account holders. Of those 2 million, 1.6 million use their account at least once a month.

The company is also making progress in the area that has proven to be the biggest challenge for online only banks – account holders using it as their ‘primary’ account - defined as having their salaries paid into it. Key to developing a profitable business model is convincing users to not only use online-only accounts for international transfers or better currency conversion rates while traveling abroad. 480,000 of Monzo’s account holders, almost 25%, now have their salaries paid into their accounts held with the fintech.

The £113 million that has been brought into Monzo’s coffers will fund its push into the USA market as well developing its proposed ‘marketplace’, which will work a little like a comparison site by offering users services such as savings accounts that it doesn’t yet provide through partners. It will also allow users to easily switch between energy providers for a better deal.

Commenting on the deal, Monzo CEO Tom Blomfield stated:

“It’s so exciting when amazing investors back our mission to transform banking and make money work for everyone. We’ll keep working hard to deliver the products our customers need.”

And equally enthusiastic Anu Hariharan, of Y Combinator Continuity Fund backed that sentiment up with:

“Banking is archaic and needs to be drastically redesigned. Monzo is the first of its kind to redefine the modern banking experience for customers around the world.”

Monzo’s leap in valuation will also please users who were given the opportunity to buy shares in the fintech during an earlier raise, contributing around £20 million to a total £211.7 million round. The move attracted criticism because users were allowed to use Monzo’s overdraft facility, which costs 50p a day, to buy shares. However, at least on paper because they can’t yet actually trade their shares, they have now realised a significant return on investment.