Monzo Withdraws US Banking Licence Application

Regulators indicated that the application was unlikely to be successful.

October 7, 2021
Monzo Withdraws US Banking Licence Application
Matt Crabtree

Written By

Matt Crabtree

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Monzo has withdrawn its outstanding application for a licence to operate as a US bank after it was told by regulators that the application was unlikely to be approved.

It’s a significant blow to the UK-based digital bank that had been hoping to continue its expansion into international markets.

It also marks the end of around two years of negotiations between the bank and the regulators, with the bank now admitting defeat and moving onto new plans for investment in its own business.

Caution From US Regulators

Monzo is still a loss-making business, which is thought to be the key reason that the US regulators wouldn’t approve the application. They have previously shown caution in handing out licences to banks that aren’t turning a profit already, to prevent welcoming companies that could have financial difficulties in future, potentially damaging customers’ own finances.

Monzo does have a full UK banking licence and had been hoping that would help its bid for a licence to be granted in America, where other fintechs without that UK licence had previously failed.

Monzo is available in the US as a digital bank in a similar way to the UK — it has an app and an ATM-card service. However, the licence would have granted it the opportunity to expand its US market much further and offer a wider portfolio of products.

The application for the licence was made last year, a year after Monzo first started conversations with the UK regulators. It was around the same time as the licence application that Monzo had its soft launch.

The £130 million losses in 2020, which were 13% worse than in 2019, are what seems to have convinced the US regulatory bodies that Monzo was not a risk worth taking at the moment.

Monzo is not the only firm to withdraw an application recently, although they are the only consumer bank. Other companies such as Square, the payments firm owned by Jack Dorsey (the CEO of Twitter), and Robinhood, an online brokerage, have also pulled their application. Revolut, one of Monzo’s main rivals in the UK, still has an outstanding application and it has not yet withdrawn.

UK Refocus

Monzo will now focus more on growth in the UK as it aims to climb towards profitability. It follows a tough period for the bank which took a 40% drop in its valuation over the COVID-19 pandemic, as well as an investigation into potential breaches.

Monzo is aiming to raise new investment in 2022 to help support growth and has been launching new products. One of the most prominent of these is the new buy-now-pay-later service which allows customers to apply for flexible finance on almost anything they buy through their Monzo account.

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