Monzo hits $5bn valuation with new funding round led by Alphabet’s CapitalG

Monzo has secured a new $430m (£339m) funding round led by Alphabet-owned CapitalG valuing the digital challenger bank at $5bn (£3.9bn).

The firm was previously valued at $4.5bn (£3.5bn) in 2021 after a funding deal with investors including Tencent, the Abu Dhabi Growth Fund, Coatue and Accel.

Other backers in the new funding round include Chinese venture capital firm HongShan and existing investors Tencent and Passion Capital.

Chief executive TS Anil said Monzo would use the funding to return to the US market. In 2021, the country’s regulators told the firm, which is a fully licenced bank in the UK, that it was unlikely to secure a US licence.

Monzo hired a new US chief executive last year and has put forward plans to expand into the market by partnering with banks that are licenced there.

Anil said in December that there was a “huge gap” in the US, which was “very large with attractive economics”. He added: “And it’s one of the few markets in the world… where you don’t need share to get scale.”

The bank is also considering expanding into Europe but has not yet announced any formal plans.

“Banking is still in the infancy of its transformation and we are seen as an outlier in pole position to win,” Anil told the Financial Times on Tuesday.

“I think of this as a race to transform how customers interact with their money, to win at a global scale.”

He added: “Through much of last year inbound interest was incredibly strong, so towards the end of the year we decided to crystallise it.”

Monzo expects to become profitable in 2024, previously posting a £116m pretax loss in 2023 driven by higher loan loss impairments from its buy-now pay-later offering.

The bank’s card earnings fell sharply during the Covid-19 pandemic. During the same period, auditors issued an uncertainty warning and the City watchdog opened an anti-money laundering investigation.

Fintech valuations broadly peaked in 2021, with the sector since struggling with interest rate hikes and higher funding costs, triggering a wave of consolidation.

Anil said Monzo had been approached by smaller firms looking to be acquired, with the bank “open” to M&A.

News of the valuation uplift comes amid expectations that Monzo will at some point launch a blockbuster public listing in London or New York.

Anil has hinted that the firm will float at some point but on Tuesday remained tight-lipped about the timing or location, saying it was “too early” to discuss.

City A.M. understands that a team at Magic Circle law firm Freshfields is advising on the latest investment.