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Monzo Aims for £4 Billion Valuation as Biggest Challenger Bank in UK

Monzo, the British FinTech unicorn, is aiming for a £4 billion valuation in its latest funding round.

The digital bank, which currently has over nine million U.K. personal current account customers, is in discussions with investors to raise fresh funds, according to The Financial Times. Top investors such as Index and General Catalyst are said to be involved in the talks. Monzo’s success has been driven by word-of-mouth referrals, making it the biggest challenger bank in the U.K. and the seventh-largest retail bank in terms of customer numbers.

Monzo CEO TS Anil hailed the achievement of crossing the nine million U.K. personal current account milestone as a “testament to the magic of Monzo.” He emphasized that the bulk of Monzo’s growth has been driven by word-of-mouth referrals, highlighting the customer-centricity that is part of the company’s DNA. Anil also expressed excitement about the future, stating that there is much more to come on Monzo’s journey to build the one app that answers all of their customers’ money needs.

Monzo’s expansion is not limited to its customer base. The company has recently added an investment feature to its offerings. The Investments feature allows customers to put their money in funds overseen by BlackRock, with a minimum investment of just one British pound. Monzo offers three funds to cater to different risk preferences: “Careful,” “Balanced,” and “Adventurous.” CEO TS Anil explained that the aim of the investment feature is to banish the barriers that customers face in getting started with investing, such as affordability and lack of knowledge.

Monzo’s success in reaching profitability sets it apart from many other European neobanks. According to a report by global consultancy Simon-Kucher, fewer than 5% of challenger banks are breaking even. However, Monzo recorded its first monthly profit earlier this year. Despite this achievement, the field remains crowded, and competition for mind and wallet share is intense.

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. Traditional banks still dominate, with consumers viewing services like PayPal, Venmo, and Chime as supplements to the services offered by traditional banks. However, 39% of respondents in the study believed 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.