Monzo valuation hits $4.5bn on back of drawing thousands of new customers

British digital bank Monzo’s valuation has surged to $4.5bn, an increase of more than 200 per cent since the start of the year, as thousands of new customers helped double revenues.

It marks a sharp recovery since warnings that the online bank could struggle to continue as a going concern after a bruising start to the pandemic.

The rising valuation follows a $500m funding round, led by Abu Dhabi Growth Fund and backed by new investors Coatue and Alpha Wave Ventures and existing shareholders Accel and Goodwater.

The online lender, which is exploring new products such as buy-now-pay-later services and potentially cryptocurrencies, was valued at only £1.25bn in February after tumbling from $2bn in 2019 because of the pandemic.

“This round comes off the back of a fantastic year for Monzo,” said chief executive TS Anil. “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.”

The online lender was hit hard last year as lockdowns caused the card transactions it relied upon to plummet, leading to a statutory net loss of £130m in 2020, an increase of 13 per cent compared with 2019.

At the time, auditors Ernst & Young warned for a second consecutive year of “material uncertainty” over its ability to continue operating as a going concern.

While the fortunes of the company known for its coral pink cards has sharply improved, its valuation still trails its main UK digital rival Revolut. In July, it achieved a $33bn valuation in a funding round led by SoftBank’s Vision Fund 2 and Tiger Global Management.

Monzo has also faced a number of regulatory setbacks this year.

The lender said in July it was under investigation by the Financial Conduct Authority over potential breaches of anti-money laundering laws and then withdrew its application for a US banking licence in October after regulators indicated it was unlikely to be approved.

However, investors have shrugged off these blows as they focus on the doubling of revenues this year, driven in part by efforts to diversify. Roughly 25 per cent of revenues came from new products launched during the pandemic such as its business and premium accounts.

It has reached 5m customers, with about 100,000 new customers joining each month.

The rise in clients means Monzo is likely to boost its headcount, although it is not expected to repeat the close to 60 per cent increase since January 2021, reaching 2,100.

It is also considering a change to its marketing strategy, having largely relied on word of mouth since it was founded in 2015.

In addition, it is exploring new products such as a platform for retail investors to invest in stocks, people familiar with the matter told the Financial Times. This will include cryptocurrency trading, although this is only at an exploratory stage.

Platforms have increasingly opened up to trading digital assets, whose total market value has skyrocketed to more than $2.4tn.

Revolut first offered cryptocurrency trading in 2017, while British investment app Freetrade has also been considering a push into the market.

As well as the online banks, established lenders including JPMorgan and Goldman Sachs have launched digital offerings in an effort to compete for younger customers.

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