Monzo is expected to close a deal for an additional £70-80 million. The final amount raised hasn’t been confirmed yet, but according to the Financial Times, the value of the company might plummet nearly 40%.
No profit yet?
As most neobanks currently are not earning any profit, they are completely dependent on capital investments to keep on working. According to their annual report for their 2019 financial year, Monzo loss for the year is over £47 million. We’re still waiting for their 2020 annual report, which might reveal more current information. 2021 is hard to predict at the moment, but I believe the year might be a game-changer to all neobanks, including Monzo.
2019 wasn’t that bad for Monzo – they experienced a big increase in customers (from 590k to 1.6m) and quite an increase in their deposits (from £71m to £461£). But I believe their breaking point might be business customers, as they have applied to be a lender through UK relief loan schemes. During COVID-19, this might be a big thing and I have no doubt it will get some small businesses to join Monzo.
But that isn’t all. At the beginning of April, Monzo was to furlough almost 300 of their staff and cut the pay for executives for 25%. This shows us, that Monzo isn’t standing tough on the ground at the moment. A lot of highly-skilled employees left Monzo in the last year. But on the positive side: just recently a former head of global merchant services for Europe at American Express, Sujata Bhatia joined the challenger bank as its new chief operating officer. Also, Dave Laramy, former head of fraud at JP Morgan Chase is to be appointed next month as the new vice president and head of global financial crime. Sometimes change is good and sometimes change is critical.
So are we going to see more neobanks going to profit year, instead of a loss year? Let’s hope so! If not – they might face the reality, that the investors don’t want to be filling their money into a broken bucket.