Monzo, the London-based digital bank, was among those to be significantly impacted during the COVID-19 pandemic. Its annual losses more than doubled. Monzo went to the extent of being uncertain to continue its operations due to the pandemic. To be specific, the annual post-tax loss in 2020 was $149.5 million, which is much higher than the $62.2 million losses in the previous year. This was the situation despite doubling its revenue.
Reaches $4.5B valuation
After a tough pandemic phase for Monzo wherein it faced a series of setbacks, it looks like there is good news. In a recent development, the digital challenger bank has secured over $500 million in an oversubscribed funding round, which values it at $4.5 billion – over a three-fold jump from its previous valuation. Also, this valuation makes Monzo the third most valuable neobank in Europe trailing behind Revolut and N26. Notably, the fintech achieved the unicorn status back in 2018.
The investment round saw new investors such as Coatue, Abu Dhabi Growth Fund and Alpha Wave Ventures along with existing investors Accel, General Catalyst, Goodwater, Passion Capital, Octahedron and Thrive. As of now, the first part of the round has been closed at $475 million and the second close is likely to happen in two weeks, which will take it to over $500 million. With this, the total funding raised by Monzo is over $1.2 billion.
Monzo is all set to grow further and faster and continue to reinvent banking with this investment. TS Anil, CEO, Monzo, said: “This round comes off the back of a fantastic year for Monzo. We’ve seen record revenues, launched new products and tools and continued to top the charts for our services. We’ve hired some incredible talent.”
Now, let’s break down some quick facts about Monzo and its success story.
#1 Freemium and Premium services
Founded by Tom Blomfield, Paul Rippon, Gary Dolman, Jonas Huckestein, and Jason Bates in 2015, Monzo is a digital bank that solves the problems faced by users in a transparent manner to make banking better. Over 5.7 million people use their bright coral cards to manage their money worldwide via the app.
The first iteration of Monzo was a prepaid card that lets customers open an account for free online and receive spending notifications in real-time and manage their finances. Now, it has grown into a full-fledged platform offering social features, premium accounts with additional perks and tools, virtual account creation and management tools, money management features, and more.
#2 Money is highly protected
As Monzo is a regulated UK bank, the money in users’ accounts will be protected up to £85,000. Money is protected by FSCS (Finacial Services Compensation Scheme), which is an independent fund set by the government to ensure people’s money is safe. In that case, if the bank goes bust, then its users will still have their money.
Also, if a card is misplaced it can be frozen from the customer’s smartphone. This feature has proven popular and many other major banks such as Lloyds have implemented this option.
#3 Cross-border spending
Monzo passes Mastercard’s exchange rate directly to users and does not charge users to pay with the Monzo card while spending in other countries. If users withdraw cash, then they can take up to £200 for free abroad. For an amount more than £200 in 30 days, users need to pay a 3% charge each time after the limit. With these features, Monzo has achieved a customer satisfaction of 75%.
#4 Strong growth
The London fintech unicorn raised the latest funding after showing strong performance and growth. It has over 5 million customers and has been adding 100,000 users each month. Over 300,000 users have paid account. Also, during the pandemic, Monzo earned 25% of its revenue from the launch of new products.
#5 BNPL feature
Focusing on growing its business and boosting revenues, the digital bank launched Monzo Flex, which is a buy now, pay later feature. It lets users split card payments into instalments simiar to Klarna. Also, it launched a business banking product, which is aimed at SMEs and sole traders.