Monzo Valued at $5 Billion as Neobank Plans Expansion

UK digital bank Monzo has been valued at $5 billion following a $430 million funding round.

The round was led by Alphabet’s CapitalG group as well as Google Ventures, HongShan Capital and existing investors Passion Capital and Tencent, Monzo said in a news release provided to PYMNTS Tuesday (Mar. 5)

“The new capital will be used to accelerate Monzo’s expansion plans following a year of record growth that saw the company move into profitability, attract millions more customers and launch a range of new products,” the release said.

The announcement comes weeks after reports that Monzo, which has around 9 million customers, was aiming for a £4 billion (or $5 billion) valuation with this funding round.

The company, which touts itself as Great Britain’s largest digital bank, is also expanding into the U.S., last year naming Cash App veteran Conor Walsh as its American CEO. Monzo has also been adding services, such as the investment tools it debuted last summer.

“While Monzo has seen significant growth and success, the PYMNTS Intelligence study ‘How Consumers Use Digital Banks’ found that only 9% of consumers use FinTechs as their primary bank, and 47% expressed hesitancy about using digital-only financial services,” PYMNTS wrote in February.

Traditional banks still rule the roost, with consumers seeing platforms like PayPal, Venmo, and Chime as supplements to the services offered by more established financial institutions. All the same, 39% of respondents interviewed for the study said they thought that digital banks could be viable alternatives to traditional ones.

“As Monzo continues to expand its services and seek a higher valuation, it remains to be seen how it will navigate the competitive landscape and attract more customers to become their primary bank of choice,” PYMNTS wrote.

PYMNTS recently looked at the need to balance physical and digital banking in a conversation with Eric Brandt, senior strategic market analyst at NCR Voyix.

“Physical is still a very important component of banking — and while you may be able to lower your footprint a little bit, you can’t abandon that channel,” he said.

That’s because physical bank branches remain crucial for specific services, particularly those that require a personalized touch, such as mortgage applications and small business loans.

“What this all means is that striking a balance between digital innovation and maintaining a physical presence is crucial for banks,” that report said.