British neobank Monzo boosts funding round to $610 million to crack U.S. market, launch pensions

British neobank Monzo said Wednesday that it’s raised another $190 million, lifting the total it’s raised so far this year to $610 million.

The company told CNBC it raised the cash from new investors including Hedosophia, a backer of top European fintechs including N26 and Qonto. CapitalG, Alphabet’s independent growth fund, also participated in the round.

Singaporean sovereign wealth fund GIC also participated in Monzo’s latest fundraise, a source familiar with the matter told CNBC. The source spoke on the condition of anonymity as details of GIC’s involvement aren’t yet public.

GIC declined to comment.

The latest funding values Monzo at roughly $5.2 billion, an increase on the $5 billion valuation it attained in March when it raised $430 million. The total $610 million round marks the single-biggest funding round for a European fintech in the past year, according to Dealroom data.

TS Anil, CEO of Monzo, told CNBC his firm plans to use the cash to build new products and accelerate its international expansion plans.

“At the heart of it we are a mission-oriented company that’s looking to build the single place where people can meet all of their financial needs,” Anil told CNBC in an exclusive interview.

“What’s exciting to me is that, as we pursue that mission of changing people’s relationship with money, we’ve built a business model that is congruent with that as well, with this model that is built entirely around the customer.”

Monzo entered the black for the first time last year, hitting profitability following the end of its 2023 fiscal year. Anil said Monzo’s looking to ramp up profits with diversification into other income generators, like lending and savings.

Notably, Anil said that Monzo’s planning to launch its first pensions product in the next six to nine months.

That would put it in competition with traditional lenders including Barclays and NatWest. Last year, NatWest acquired 85% of U.K. workplace pension services provider Cushon for £144 million ($180 million).

Monzo’s funding expansion caps off a busy year for the nine-year-old firm, which now counts more than 9 million retail customers in the U.K. — 2 million of whom joined Monzo last year alone — and over 400,000 business customers.

Last year saw Monzo make its first foray into investments with a feature allowing customers to invest in funds managed by BlackRock.

Anil said Monzo identified that about a third of people using the service had never invested previously — and, more notably, 45% of the women investing via the Monzo app are first-time investors.

Another big priority for Monzo in the coming months is international expansion.

The company recently restarted its U.S. expansion efforts, hiring a long-time executive from Block’s Cash App as its new U.S. CEO after earlier abandoning a bid to acquire a banking license from U.S. regulators.

For now, Anil says, Monzo’s team in the U.S. is primarily focusing on product to ensure that the service it has there is of high enough quality that it can compete with major incumbents like JPMorgan and Citibank.

The U.S. has proven notoriously difficult for European neobanks to crack.

Berlin-based digital bank N26 notably withdrew from the U.S. in 2021.

Revolut, meanwhile, has failed to formally file an application for a U.S. bank charter yet despite having earlier said it intends to file a draft application for a U.S. bank license.

“What I like about how we’re approaching this is, at the heart of it, it’s not just words,” Anil told CNBC in an exclusive interview Tuesday.

“The necessary conditions for the U.S. for us is getting the product right. That’s what we’re spending our time and effort on there.”

European expansion is also on the cards, Anil said, although he didn’t commit to a date for when this will happen.

Longer term, Monzo is also planning to launch a mortgages product, which would see it compete much more aggressively with U.K. retail banks in the world of lending.

Monzo currently offers monthly installment plans and consumer loans via its app.

It also has a “Mortgage Tracker” feature which lets users track how much they’ve paid toward their mortgage and how much equity they’ve built.

But it’s yet to officially roll out a service that would let people apply for mortgages directly within its app.

Anil said Monzo is in the early stages of exploring partnerships with lenders to offer this.

He declined to name any prospective partners.

One thing Monzo hasn’t got any immediate plans for is an initial public offering.

Although he thinks Monzo will make a “great public company one day,” Anil said it’s still too early to talk of an IPO. He says he’s focused on growing Monzo at scale before reaching that milestone.