Fintech Investments

Monzo To Reach Unicorn Status With Fresh Round Of Funding

Monzo, the U.K. digital bank, is on track to become the next European FinTech startup to reach unicorn status.

According to a report in the Financial Times, with a new round of funding Monzo is expected to have a valuation of up to $1.5 billion, giving it the new status in the investment community. Monzo is signing up 18,000 customers a week and is aiming to hit the 4 million mark over the course of the next few years, Tom Blomfield, the chief executive, told the paper.  The valuation of $1.5 billion will be more than quadruple the valuation of $356 million set at its previous fundraising in November of 2017, two people familiar with talks told the Financial Times. Investors in the current round of fundraising include Accel Partners. The round is expected to be announced before the end of 2018, reported the Financial Times.  Blomfield declined to comment on the fundraising efforts, saying only: “Our investors are totally aligned with our plan and completely comfortable that we are not looking to break even this year or next.”

According to the report, the new capital will go to expand the bank’s product offering, with Monzo gearing up to launch short-term unsecured loans and/or higher interest savings accounts through third-party partners. The report noted that Monzo is burning through its cash at a quick pace and had a pretax loss of  £33m on revenues of £1.8m last year. According to the report, customer deposits at the end of February were £71.2m, equivalent to less than £150 per account. “If you are the number one neobank by users then everyone is going to want to get in,” Lex Sokolin, global director of FinTech strategy at research firm Autonomous, said in the report. “So to me that [Monzo valuation] number isn’t crazy as much as at the optimistic end of the spectrum.”

According to Blomfield, Monzo plans to increase its lending from 5 percent to 10 percent of its deposit base, which he said is well lower than what many traditional lenders do. Meanwhile, the executive said 45 percent of its customers are putting £500 or more into their accounts each month. In the future, Blomfield said Monzo’s main revenue stream will come from commissions for helping customers manage their money better.  “We are trying to build a control centre or dashboard for your financial world,” he said.

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