Monzo withdraws US banking license application

UK fintech Monzo has withdrawn its application for a US banking license following talks with regulators at the Office of the Comptroller of the Currency (OCC).

The regulators told the company that it was unlikely the banking license would be approved, according to the Financial Times.

Monzo currently operates a pilot programme in the US and has a few thousand customers through a partnership with Ohio-based Sutton Bank, but was aiming to establish a fully licensed bank to expand its operations. A source close to the bank said that there had been an "active debate" internally on whether forming a fully licensed bank was the best way to expand.

“Following recent engagement with the OCC, we’ve decided to withdraw our banking license application for our US start-up,” a Monzo spokesperson told CNBC in a statement.

“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 US through existing partners and invest further in the UK. We have big ambitions for Monzo US. There are many routes to market we’re exploring that have been successful for other market entrants who are now major players.”

In July last year, Monzo’s future was in jeopardy after the firm reported its annual losses had more than doubled during the pandemic. In its 2020 earnings report, the company announced post-tax losses of £113.8 million, up from £47.1 million in 2019. The firm had launched paid and business accounts to try and find new ways to monetise its customer base, but also scrapped plans to hire 500 new workers and cut its workforce by 8% instead.

Despite this, in December it raised £60 million during a funding round, after receiving £65 million in July, taking the total investment for 2020 to £125 million. This helped the bank finish 2020 in good health, despite the pandemic. The firm revealed it had almost five million customers and around 60,000 business users after adding 35,000 since June 2020.