Monzo seeks US CEO to double down on expansion

British digital bank Monzo is doubling down on expansion from the state but has no immediate plans to pursue a banking license in the world’s largest economy, according to its COO.

“As for the US, the time is now for us – we’re investing, and that’s the next big frontier,” Sujata Bhatia tells Sifted in an interview, adding that the neobank is actively hiring a new US CEO to lead the charge.

It’s not the first time Monzo has flirted with US expansion – Carol Nelson was hired as US CEO in February 2021. But she resigned last year, shortly after Monzo withdrew its application for a banking license in the United States when it became clear, regulators were unlikely to give their approval.

Since then, the position has been unfilled. Now the neobank is doubling down on expansion and hiring in the US – and has dropped the idea of ​​a license before it is launched on the market.

No license? No problem

“The banking license is not something for us – it is not so critical in the US,” says Bhatia.

So far, no European fintech has been able to crack the US market, and Monzo is up against tough local competition – namely $25 billion neobank Chime, which has 13 million local customers.

But many of its biggest potential US rivals, including Chime, have achieved scale while bypassing the cumbersome licensing process. They do so by piggybacking on the full banking licenses of US “partner” banks. This means that they have to share their income with these banks – which is economically viable because exchange rates in the US are many times higher than in Europe.

“You’re sharing a much bigger pie, and that’s why this model will work for us out there,” says Bhatia.

Monzo already ran a pilot program in the US with Sutton Bank in 2021. Rival Revolut has also partnered with a local US bank and applied for a US banking license two years ago – although it has yet to share any updates on that process.

Fewer products for fewer people

Without a full banking license, these startups cannot offer the full product package that customers expect from their primary bank, such as loans and deposits. So what kind of offerings does Monzo have in mind for the US?

“The US is a big opportunity and a big country – but it’s super-fragmented. This means there’s a more sophisticated, segmented version of Monzo in the US that we want to talk about,” says Bhatia.

Monzo is more likely to target one demographic (eg age or geography), which Bhatia says could be large enough to start scaling in the US.

“This means Monzo US will be a little less about the ‘all things to all people’ bank we’re building in the UK,” she says.

A product of profitability?

Bhatia is keen to stress that the renewed US pressure is not the result of an improvement in financial performance, however, but more a product to reach some market penetration in the UK, where it has 7 million customers.

“We have momentum here now, so it’s a good time to be able to focus on the US,” she says. “It’s not really related to profitability, but more the ability to focus. Two years ago it wasn’t, but now is the right time.”

The bank says it expects to deliver its first annual profit by the end of 2023.

Amy O’Brien is Sifted’s fintech reporter. She tweets from @Amy_EOBrien and writes our fintech newsletter — You can register here.