Digital bank Monzo has raised a further £113m of funding to reach a valuation of more than £2bn, more than doubling its price tag in less than eight months and becoming one of the UK’s most valuable technology startups.
The latest cash injection comes from a group of investors led by Y Combinator, a US-based investment firm best known for backing holiday rental platform Airbnb and payments company Stripe.
Monzo now boasts more than 2 million customers, which could rise to 3 million within months, according to chief executive and co-founder Tom Blomfield.
Popular among British millennials and famed for its distinctive coral pink-coloured cards, Monzo recently expanded into the US. It’s also aiming to broaden its appeal among older age groups in the UK with a television ad campaign launched this year.
“It’s so exciting when amazing investors back our mission to transform banking and make money work for everyone,” Mr Blomfield said in a statement.
Monzo started off as a pre-paid card before obtaining regulator approval to provide banking services such as overdrafts and direct debits in 2017.
Like many fast-growing technology companies it has not yet made a profit. Despite achieving sought-after “unicorn” status — a term referring to a startup valued at more than $2bn – it widened its losses to £33m last year.
The company also faces increasingly stiff competition in the app-only banking sector. Rival Starling Bank received a £100m grant in February from a fund set up by Royal Bank of Scotland under government instructions, to help improve competition in the UK’s retail banking sector. That came shortly after Starling raised £75m from investors.
Another competitor, Revolut, which boasts more than 4.5 million customers including 1.7 million in the UK, was valued at £1.3bn at its last fundraising.
Each of the digital challenger banks is seeking to take business from established high street lenders, which still dominate the provision of retail financial services in the UK.
Traditional banks have closed thousands of branches in recent years as they seek to cut costs and adapt to customers who are increasingly content to conduct most of their banking online.
But challengers like Monzo have yet to persuade the majority of consumers to fully make the switch to an app-only service. Monzo says only about 30 per cent of its customers use it as their primary current account, though the company expects this to rise.