Monzo increases funding to $610 million to crack US and launch UK pensions

British neobank Monzo said Wednesday it has raised another $190 million, bringing the total it has raised so far this year to $610 million.

The company told CNBC that it had raised the money from new investors including Hedosophia, a backer of top European fintechs including N26 and Qonto. CapitalG, Alphabet’s independent growth fund, also participated in the round.

Singapore’s sovereign wealth fund GIC also participated in Monzo’s latest fundraise, a source familiar with the matter told CNBC. The source spoke on condition of anonymity as details of GIC’s involvement are not yet public.

GIC declined to comment.

The latest funding values ​​Monzo at about $5.2 billion, up from the $5 billion valuation it reached in March when it raised $430 million. According to data from Dealroom, the total round of $610 million is the largest funding round for a European fintech in the past year.

TS Anil, CEO of Monzo, told CNBC that he plans to use the money to build new products and accelerate his international expansion plans.

“At our core, we are a mission-driven company that wants to build the one place where people can meet all their financial needs,” Anil told CNBC in an exclusive interview.

“What’s exciting to me is that as we pursue that mission to change people’s relationship with money, we’ve built a business model that’s also congruent with that, with a model built entirely around the customer.”

Monzo went into the black for the first time last year and became profitable after the end of the 2023 fiscal year. Anil said Monzo wants to boost profits by diversifying into other sources of income such as lending and savings.

Notably, Anil said Monzo plans to launch its first retirement product in the next six to nine months.

That would put it in competition with traditional lenders, including Barclays and NatWest. Last year, NatWest acquired 85% of British pension services provider Cushon for £144 million ($180 million).

Monzo’s funding expansion caps off a busy year for the nine-year-old company, which now has more than 9 million private customers in Britain – 2 million of whom joined Monzo last year alone – and more than 400,000 business customers.

Last year, Monzo made its first foray into investing with a feature that allows customers to invest in funds managed by Black rock.

Anil said Monzo has found that around a third of people using the service have never invested before – and, more specifically, 45% of women investing through the Monzo app are investing for the first time.

Another big priority for Monzo in the coming months is international expansion.

The company recently restarted its U.S. expansion efforts and hired a longtime executive from Block’s Cash App as its new U.S. CEO, after previously abandoning a bid to acquire a banking license from U.S. regulators.

For now, Anil says, Monzo’s US team is focusing on product to ensure the service it offers there is of high enough quality to compete with big established players like JPMorgan And Citibank.

It has proven notoriously difficult for European neobanks to crack the US.

Notably, Berlin-based digital bank N26 withdrew from the US in 2021.

Revolut, meanwhile, has failed to formally apply for a US banking charter, despite previously saying it plans to submit a draft application for a US banking license.

“What I like about the way we’re approaching this is that at its core, it’s not just words,” Anil told CNBC in an exclusive interview on Tuesday.

“The necessary condition for the US is that we get the product right. That’s where we spend our time and effort.”

European expansion is also on the cards, Anil said, although he did not set a date for when this will happen.

Longer term, Monzo also plans to launch a mortgage product, which would allow it to compete much more aggressively with UK retail banks in the lending space.

Monzo currently offers monthly payment plans and consumer loans through its app.

It also has a ‘Mortgage Tracker’ feature that allows users to track how much they have paid on their mortgage and how much equity they have built up.

But it has yet to officially roll out a service that allows people to apply for mortgages directly from the app.

Anil said Monzo is in the early stages of exploring partnerships with lenders to offer this.

He declined to name any potential partners.

One thing Monzo has no immediate plans for is an IPO.

While he believes Monzo will one day become a “great listed company,” Anil said it is too early to talk about an IPO. He says he’s focused on growing Monzo at scale before reaching that milestone.