Monzo, the UK-based digital only banking entity which has been attempting to acquire a US banking license, announced withdrawing its bid following more than a year of discourse with regulatory authorities, according to the Financial Times.
The news marks a large blow to the British fintech, which had hopes of expanding to the US in a way other foreign financial institutions were unsuccessful.
The company had a soft launch of its services in June 2021, offering financial services via an ATM card and mobile application, but was hoping to roll out additional partnerships and products with the approval of the banking license.
While the UK has approved dozens of licenses in recent years in order to promote competition, US regulators have been hesitant to grant licenses in recent years. Varo Bank became the first consumer fintech in the US to secure a national bank charter from the OCC last year.
Monzo has seen interesting growth and loss since launching in 2015, attracting five million customers in that time. Still, it has been unable to turn a profit to-date, with annual losses widening to £130 million ($181.68 million), according to the challenger bank’s annual report.
The digital only banking startup said that COVID-19 led to “significant doubt” about its ability to continue “as a going concern,” with market value dropping 40% to $1.7 billion in that time, according to Reuters.
“Following recent engagement with the OCC, we’ve decided to withdraw our banking license application for our U.S. start-up,” a Monzo spokesperson said in the statement.
According to the Financial Times report, Monzo has been having “active debate” internally over the decision to form a fully licensed bank. US competitors such as Chime, valued at $25 billion, have been able to successfully grow in the past few years, despite card interchange fees making fully licensed partner banks more sustainable in the US.
Monzo first applied to its U.S. banking license in April of last year, according to the Telegraph. The digital bank realized in the past few weeks that its bid to the Office of the Comptroller of the Currency (OCC) was likely going to be unsuccessful.
Now Monzo plans to run a pilot program, utilizing a partnership with Ohio-based Sutton Bank, and says the news will redirect focus back to the UK, according to CNBC.
“While this isn’t the outcome we initially set out to achieve, this allows us to build and scale our early-stage product offer in the U.S. through existing partners and invest further in the U.K. We have big ambitions for Monzo U.S. There are many routes to market we’re exploring that have been successful for other market entrants who are now major players,” the company said in a statement.