A spokesperson for the bank said: “Following recent engagement with the OCC, we’ve decided to withdraw our banking license application for our US start-up. While this isn’t the outcome we initially set out to achieve, this allows us to build and scale our early-stage product offer in the US through existing partners and invest further in the UK.”
The news was first reported by the Financial Times. The paper said the bid was abandoned after it became clear the Office of the Comptroller of the Currency (OCC) would not support the loss-making bank’s bid.
Monzo said it was still committed to expanding in the US and would do so through its existing partnership with Ohio’s Sutton Bank, rather than as a standalone lender.
“We have big ambitions for Monzo US,” a spokesperson said. “There are many routes to market we’re exploring that have been successful for other market entrants who are now major players.”
Monzo first applied for a US banking license in April 2020. Regulators in the US take a tougher stance on banking licence approvals than the UK watchdogs, which has sort to promote competition in the banking sector in the aftermath of the 2008 financial crisis.
The backdrop to the abandoned bid is a tough 18 months for the lender. Monzo was forced to lay off staff and accept a cut price valuation in a funding round last year as revenues slumped during the pandemic. Losses jumped by 13% last year to £130 million. The startup has also disclosed an investigation by the UK’s Financial Conduct Authority into anti-money laundering control lapses.
Monzo has recently launched new products such as buy now pay later features and paid-for accounts in a bid to get the business back on an even keel. The company insists revenues have recovered in recent months and put Monzo on the path to profitability.
Monzo’s rival Revolut is also applying for a US banking license and hopes to have clarity on its application by early next year.