UK Neobank Monzo Records First Monthly Profits


British neobank Monzo says it has reached profitability while reducing its annual losses.

According to the bank’s annual report, Monzo reported net operating income of $266 million for the year ending February 2023, nearly doubling its income from last year. Monzo’s losses, meanwhile, came to $144 million, down somewhat from $147 million last year.

“We’re entering FY2024 cash-flow positive with a well capitalised balance sheet,” Chief Financial Officer James Davies wrote in the report.

“In the first two months of FY2024 we reached profitability and are now a business with diverse and stabilising revenue from a large, and growing, personal and business customer base.”

According to the report, 1.5 million new customers opened personal accounts at the bank during the year, bringing the total to 7.2 million, with spending by those customers up 38%.

“Business customer numbers have increased 79%, to over 200,000, driving a 62% increase in business banking revenues,” the report said. “We’re seeing really positive trends with our business customers in general.”

Helping drive revenues were income from the bank’s Monzo Plus and Monzo Premium subscription services, up 77% for the year, with more than 350,000 personal customers now paying monthly subscription fees.

“These customers are typically more engaged than non-subscribers, driving revenue and demonstrating the value of the additional features in our subscription products,” Monzo said.

The report comes days after fellow U.K. neobank Starling released earnings figures showing the company more than doubling its revenue for the year.

As noted here last month, Starling and Monzo are in the minority when it comes to European neobanks, most of which have struggled to turn a profit.

“The fact remains that the field is crowded, the profits are thin, the jockeying for mind and wallet share is intense,” PYMNTS wrote.

That report points to an estimate from global consultancy Simon-Kucher which shows that under 5% of challenger banks are breaking even.

Some digital-only players got a boost when Silicon Valley and Signature banks were taken over by regulators in March and companies looked for places to shift their money, but “deposit ‘loyalty’ might prove elusive as these same enterprises chase yield,” the report said.

And a tipping point for the sector could take some time to arrive, with research by PYMNTS showing that only 9% of consumers use FinTechs as their primary bank, while 47% report reluctance about using digital-only financial players.