Monzo’s US Retreat Highlights Neobanks’ Expansion Challenges

Neobanks have spent the better part of a decade refining digital-first models and then attempting to transplant them into new markets—with at least some strategy that what works in in one geography would travel cleanly into another, as living life digitally is a global phenomenon.

Gen Z Drives Adoption

PYMNTS Intelligence data shows that younger consumers remain central to the neobank proposition, but their expectations are more demanding than simple app engagement. Nearly three-quarters of Generation Z consumers use digital wallets at least once a week, and a majority say they would consider a nontraditional provider as their primary banking partner.

That openness is rooted in behavior, but not necessarily in brand loyalty. Gen Z users manage finances through the same interfaces they use for commerce and communication, favoring integrated environments where payments, savings and spending sit together.

Daily engagement can be won through design and features, but primary account status depends on whether those platforms can hold deposits, extend credit and support long-term financial activity.

Monzo Pulls Back From the US

As widely reported on Tuesday (March 31), U.K. neobanking giant Monzo has made the decision to withdraw from the U.S. market. The move is one that arguably brings the structural challenges of crossing borders into sharper focus. The company had maintained a limited U.S. presence for several years, offering features such as joint accounts and savings tools tailored to digitally native users.

Recent reporting indicates that Monzo is now stepping away from that effort, choosing to concentrate on markets where it already has scale and regulatory footing. And the U.S. incumbents, large FinTechs and infrastructure providers already compete on similar terms.

Charter Ambitions

The withdrawal follows a period when Monzo had reportedly been reconsidering a U.S. banking license. The company had previously withdrawn an application in 2021 after regulators signaled approval was unlikely, and later weighed restarting that process as part of a broader expansion plan.

A charter would have allowed Monzo to operate under a single regulator, access core payment rails and originate loans directly. Without it, the firm remained dependent on partner banks, which can constrain margins and limit product scope.

Scale in the UK

In its home market, Monzo has achieved meaningful scale. According to Monzo’s website, the FinTech serves more than 12 million customers and has added customers at a steady pace while growing deposits and revenue.

Annual results point to rising balances and increasing use of Monzo as a primary account, supported by a mix of interchange, subscriptions and lending.

Those metrics illustrate what success looks like for a neobank operating with regulatory clarity and brand recognition. They also highlight comparable gaps in the U.S., where building that same foundation requires navigating federal and state oversight while competing with institutions that already control the balance sheet.

The U.S. market presents a different competitive structure. Traditional banks have invested heavily in digital channels, while established FinTechs offer similar features around payments, savings and budgeting. Customer acquisition costs are high, and switching behavior does not always follow engagement patterns.

Geography as Constraint?

PYMNTS Intelligence findings point to a further complication. Consumers are willing to experiment with new apps, but sustaining that relationship long enough to become the primary financial provider is more difficult, particularly when core services such as lending and deposits remain tied to regulated entities.

For neobanks without charters, the strategy must include partners for key functions, which introduces operational limits and reduces control over the customer experience.

Licensing regimes, capital requirements and access to payment rails determine how far a model can extend. Engagement may open the door, but deposits and credit define whether the institution can remain in the room.