Monzo Revenue Surges 250% as UK Neobanks Talk Up Profitability

Monzo is one step closer to achieving annual profitability by the end of this year.

The firm’s latest earnings show that the U.K.-based neobank’s annualized revenues increased by 250% to 440 million pounds (about $542 million) in the year to December 2022.

The figures, first reported by Sifted and confirmed by a Monzo spokesperson in an email to PYMNTS on Tuesday (Jan. 31), follow comments made by CEO TS Anil in December that the neobank “will be profitable in the next financial year.”

The report noted that the digital bank has been cashflow positive since October 2021, setting the stage for Anil’s statement to be realized if the digital bank can continue that streak in the coming months.

Few neobanks have attained the holy grail of profitability. Now that Monzo’s income outweighs its expenditure, it joins an exclusive club.

In May, a report by Simon Kucher and Partners estimated that less than 5% of neobanks globally had achieved breakeven, pointing to the growth-before-profit mentality that has reigned supreme in the space since the early days.

Yet, 2022 marked a significant turning point for the sector. And in light of a wider slowdown in tech investment that saw a number of high-profile FinTech down rounds, virtual banks have become increasingly focused on unit economics.

The Race to Breakeven

Weary of the potential devaluation that might come with additional fundraising, Monzo and several major U.K. digital banking players have, at various points, talked up their profitable, or near-profitable status.

For example, in what appeared to be a thinly veiled dig at some of her peers, Starling’s CEO, Anne Boden, wrote in a January blog post that the neobank has never chased the “inflated” valuations that other FinTechs have.

“We’re profitable, very well capitalized and have no need to raise money,” Boden argued, adding that “it’s no accident that we have never sought a silly valuation, even when the prospect of one was dangled before us.”

To give credit where it’s due, Starling did beat a number of its rival U.K. neobanks in the race to break even and reported its first full year of profitability in July. What’s more, Boden also noted in her blog post that the firm expects to more than quadruple its pre-tax profits to more than 250 million pounds (about $308 million) in its 2023 annual results.

The past year has also seen another neobank, Zopa, hit the crucial landmark. As the bank’s CEO, Jaidev Janardana, told attendees at the Innovate Global Finance Summit in April of last year, the FinTech firm achieved profitability within just 21 months of attaining its U.K. banking license.

“Today’s news makes Zopa one of the fastest digital banks to achieve profitability ever and reinforces our thesis on the importance of sustainable growth as a catalyst for accelerated product and market expansion,” Janardana said at the time.

As for Revolut, by far the largest British neobank in terms of valuation and customer base, the firm’s CEO, Nik Storonsky, told the Sunday Times in September that it will post a profit in its long-awaited 2021 annual report.

That has yet to materialize, however, leaving a big question mark hanging over the company’s finances amid pressure from U.K. regulators to improve its audits and internal controls for financial reporting.

In the end, neobanks that have yet to turn a profit will likely argue that business is a marathon, not a sprint. But with some of the biggest players in the space now reporting positive margins, those that don’t will be under more pressure to explain why.

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