UK digital bank Monzo is doubling down on stateside expansion but has no immediate plans for pursuing a banking licence in the world’s biggest economy, according to its COO. 

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

It’s not the first time that Monzo has flirted with US expansion — Carol Nelson was hired as US CEO in February 2021. But she stepped down last year, shortly after Monzo withdrew its banking licence application in the US when it became clear regulators were unlikely to give their approval.  

The role has been unfilled since. Now, the neobank is doubling down on expansion and hiring in the US — and has ditched the idea of a licence before launching in the market.

No licence? No problem

“The banking licence isn’t a thing for us — it’s not all that critical in the US,” Bhatia says. 

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

But many of its biggest potential US rivals, Chime included, have achieved scale while bypassing the cumbersome licensing process. They do so by piggybacking on the full banking licences of US “partner” banks. This means they have to split their revenue with these banks — which is economically viable because interchange rates in the US are many times higher than in Europe.

“You’re splitting a much bigger pie, which is why this model will work for us out there,” Bhatia says.   

Monzo already ran a pilot programme in the US with Sutton Bank in 2021. Rival Revolut has also partnered with a local US bank and applied for a US banking licence two years ago — though it’s yet to share any updates on that process. 

Fewer products for fewer people 

Without a full banking licence, these startups can’t offer the full suite of products that customers expect from their primary bank, like loans and deposits. So what kind of offering does Monzo have in mind for the US? 

“The US is a huge opportunity and a huge country — but it’s super fragmented. This means there’s a more sophisticated, segmented version of Monzo in the US that we would be talking about,” Bhatia says.

Monzo will more likely target one demographic (e.g. age or geography), which Bhatia says can be big enough to start scaling in the US. 

“This means Monzo US will be a little bit 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 emphasise that the renewed US push is not a result of an improvement in its financial performance, however, but more a product of reaching a certain market penetration in the UK, where it has 7m customers.

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

The bank says it expects to post 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 sign up here.