British banking app Monzo has doubled its valuation as it prepares to take on America. But the big incumbents and Big Tech are daunting opponents.

Monzo has been awarded the ultimate Silicon Valley seal of approval: A $144 million fundraising round led by Y Combinator, the biggest name in startup accelerators. The deal values the British banking app at $2.5 billion, twice what it was worth in the private markets last year. It has been given a license to lose money like never before as it tries to conquer America, the El Dorado for fintech challengers.

The company’s attempt to displace the old “out of touch” lenders, and to show that millennials can get as excited about their bank accounts as they do about Instagram, warrants a little skepticism though. It’s unclear how Monzo intends to make a profit or deliver decent returns to its venture capital backers in a low-margin market that’s crammed with upstart rivals and dominated still by the big banks. Regulators are a worry too.

Behind Monzo’s brightly-colored debit card, slick smartphone app, and “Investival” crowdfunding events where you can swig beer and eat street food, is a business that looks pretty much like… a bank. Or rather a very tiny one. It has 2 million U.K. customers; the leading British retail lender Lloyds Banking Group Plc has 10 times as many. At the end of February, Monzo had 71.2 million pounds ($90.2 million) of customer deposits, a microdot next to Lloyds’s 400 billion pound balance sheet.

Whereas most banks would seek to lend from those deposits to earn a return, Monzo doesn’t really do that. Its most recent accounts show loans making up only about 0.1% of its total assets. It has started to dabble in personal lending, but the bulk of its revenue comes from fees and commissions. Its main loan product is overdrafts, for which it charges up to 15.50 pounds a month. Otherwise, it relies on getting commissions from partner companies, which use Monzo’s app to offer their own products such as savings accounts and switching energy providers. These are cutthroat markets.

Regulatory barriers add to the financial pressure: Monzo posted a loss of 30.5 million pounds in its fiscal year ended 2018. Banking license requirements pushed it to raise extra funds in 2017 and new rules are coming in all the time. Britain’s Financial Conduct Authority is cracking down on overdraft charges. No wonder Monzo has started demanding fees for its premium current accounts. The perks may include “swag” like T-shirts, but 72 pounds a year is pricey.

Now consider its next target, the U.S. market. A smorgasbord of cheesily-named mobile banks has been operating there for years: Simple, Chime, Varo, etc. They’ve been trying to challenge the egregiously fat fees charged by big incumbent retail banks, which is fair enough. Yet they’ve got nowhere near dislodging the top lenders. For all their flaws, the biggest banks have the most features packed into their mobile apps, according to analysts at Standard & Poor’s. JPMorgan Chase & Co.’s yearly $11.4 billion tech budget could gobble up four Monzos. Is this a market that’s truly ripe for disruption?

Startups do have the edge over their bigger rivals in terms of their institutional simplicity. Victor Basta of the boutique investment bank Magister Advisors reckons the compliance demands at big financial firms mean it might take them six months to match what a startup can do in six weeks. But the heft of Wall Street and Europe’s biggest lenders does give them an advantage in the true fight over finance’s future: With Apple Inc., Inc. and Facebook Inc. The tech giants have the cash, scale, data and engineering smarts to make serious incursions into Main Street if they so choose.

So Monzo and its ilk will probably find themselves competing with big banks and Big Tech one day. When that happens, they risk becoming roadkill – or street food.

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