British digital bank Monzo will join the ranks of the European financial tech unicorns with recent fundraising expected to place its valuation up to USD 1.5 Billion. The Company has grown by taking advantage of the millennial’s increasing demand to manage finances on mobile devices rather than at traditional banks.
Monzo is one of the financial service providers that gained banking licenses in Europe, charges no annual fee and recently started offering overdrafts. It has been reported to be burning through cash and made a pre-tax loss of EUR 3 Million (USD 3.42 Million) on revenues of EUR 1.8 Million (USD 2.05 Million) last year according to The Financial Times.
The London-based digital bank is signing up 18,000 customers a week and is looking to reach as many as 4 Million customers in the next couple years, according to its Chief Executive, Tom Blomfield.
Monzo’s valuation was worth USD 356 Million at its last fundraising in November 2017 and is set to be valued over quadruple that at a valuation of USD 1.5 Billion, according to two people familiar with the matter. Its latest funding round, backed by Silicon Valley-based VC group, Accel Partners, is looking to raise USD 150 Million and is expected to be announced before the end of 2018.
The funds are expected to be used to expand the Company’s plans that include short-term unsecured loans.
Monzo launched in 2015 with pre-paid cards, and started moving its users to full current accounts in 2017, after receiving the banking license that allows deposits up to EUR 85,000 to be insured by the UK’s Financial Services Compensation Scheme. It looks to make money by lending out more of its deposits.
Although only a fifth of Monzo’s approximate 870,000 current account holders are paying salaries into the accounts, Blomfield said more than 45% of customers were putting at least EUR 500 a month into their accounts and the number has been growing rapidly. Over the long term, the Company’s main revenue stream would come from commissions from helping customers manage money better, he said.