United States of Monzo: Monzo launches in the US

July 1, 2019

2 min read

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What's going on here?

Monzo (the UK-based trending ‘challenger’ bank) has set up business in the United States. The digital bank has received fresh funds to double its valuation to exceed £2bn, in just 8 months.

What does this mean?

The startup company known for their user-friendly app, has had a successful launch in LA and other big cities in the US. With just under 2 million users in the UK since Monzo’s creation in 2015, it is now growing at almost 250,000 new customers per month.  

The funds came from the Silicon Valley “start-up accelerator”, Y Combinator Continuity. This is the same company that funded Dropbox and Airbnb. The investment will be used “to support [Monzo’s] growth in the US”. With thousands already on the US waitlist, it seems Monzo can be assured of a successful launch across America.

What's the big picture effect?

If Monzo’s move proves successful, this could serve as a wake-up call to some of the major UK banks and firms and open their eyes to the success that can be had abroad. The move would boost revenue exponentially, as Monzo is currently demonstrating. This is mainly due to the extremely fragmented market in the States, and the fact that it has no real dominant player. This is quite the opposite to the situation in the UK.

Further, Monzo’s expansion may make banks consider a change to their approach to banking in general. Rather than focusing on “lending at scale”, it can be argued that they should, like Monzo, prioritise building a “marketplace model”. Essentially, the marketplace model relies on the retention of clients through the efficient use of a platform. Namely, the platform advertises a number of different services rather than solely pushing the service offered by the company hosting the platform. This is how Monzo currently operates; they create a marketplace for others to offer their own services, but by using the platform Monzo retain clients even if those clients aren’t purchasing Monzo’s actual product. Although this would be a radical change, Monzo is clearly reaping the benefits from it, and they stay competitive by providing instant spending notifications and zero fees on overseas payments.

However, Monzo will undoubtedly face difficulties by entering a completely different market in the US. For instance, there are substantially different saving and spending trends in the US, credit cards are linked to reward points systems, and mobile payments are not as ‘popular’ as in Europe. Nevertheless, Monzo being the savvy fintech (financial technology) company it is, should be able to compete with the likes of Paypal, SoFi and even the long-established JP Morgan.

Report written by Kaush K

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