Monzo Secures $ 475 Million Funding To Reach $ 4.5 Billion Valuation

The news: Monzo pocketed $ 475 million to reach a valuation of $ 4.5 billion in his last round, according to the Financial Times.

The UK-based neobank’s valuation is now up 200% from its February 2021 nadir of 1.25 billion pounds ($ 1.6 billion), following a pandemic-induced drop from relative to $ 2 billion in 2019.

Neobank Account Holders in UK, by Chart Company


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More on this: The challenger closed his new round despite multiple problems:

  • In its 2021 annual report, the company reiterated that it is not certain that it can continue to function.
  • The company also disclosed in the report that he is the subject of an anti-money laundering investigation by the UK’s Financial Conduct Authority (FCA).
  • In October, he chose to submit the offer for a US banking license.

Trend research: Monzo’s capital injection is just the latest this year in a series of big


neobanks

operating in several countries:

  • Brazil-based Nubank pocketed $ 2.6 billion for its IPO this week and reached a valuation of around $ 41 billion, according to multiple reports. The figure hovered around the high end of the company’s price bracket, which it downgraded last week.
  • In October 2021, the German company N26 brought over $ 900 million with a valuation over $ 9 billion.
  • UK based Revolut raised $ 800 million in July 2021 with a valuation of $ 33 billion.
  • US based chime landed $ 750 million and got a valuation of $ 25 billion in August 2021.
  • UK based Starling capped a round of £ 322 million ($ 412.9 million) in April 2021, with a pre-currency valuation of £ 1.1 billion ($ 1.41 billion).
  • Lydia, based in France became a unicorn by crossing the $ 1 billion valuation mark due to a $ 100 million increase this week.
  • bunq based in the Netherlands raised 193 million euros ($ 220.1 million) last week thanks to its very first round of external funding.
  • Varo, based in the United States saw its valuation soared to $ 2.5 billion in September 2021 due to the $ 510 billion bagging.

The big takeaway: Leading neobanks face a coming of age as they decide where to deploy a wave of fresh capital.

Past funding rounds have effectively subsidized the challengers’ steadfast attention to customer acquisition—No matter how much it cost them — by eliminating unhappy users from digitally impaired incumbents.

But as the neobanks developed, the old banks became more digital savvy, started to co-opt characteristics that previously differentiated neobanks from incumbents and narrowed the gap, particularly in the United States.

Recent rounds of funding demonstrate continued investor confidence in the space. But neobanks need to show they can do more than just sign up new customers.

As challengers mature, they have an array of options to capitalize on their recent capital injections, including:

  • Expansion into new markets, or at least doubling of them.
  • Deployment of new products, such as buy now, pay later (BNPL) or securities trading. Wider product lines can attract more customers or improve engagement with existing customers.
  • Maintain their differentiation from the incumbents. This dilemma is now being played out in the United States, as established players reduce or eliminate their overdraft fees– who once helped neobanks who never charged them to grab unhappy customers.

Each option would bring neobanks closer to profitability by providing them with new ways to monetize users or maintain their competitive edge.

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