Monzo makes first profit as it plans further investments

One of the UK’s fastest-growing startups, online banking giant Monzo, has reported its first annual profit, marking a key milestone in the fintech’s business journey.

Monzo, which has previously featured on the Startups 100 Index, posted a pre-tax profit of £15.4 million for the last financial year, after recording a £116 million loss a year earlier.

In the last year, Monzo also unveiled its first investing product, and raised almost £500m in new funding, boosting its overall valuation to an estimated £3.9 billion.

From start to fintech

We listed Monzo as one of our hottest new startups back in 2016, just one year after it was founded. At the time, it serviced 200,000 customers.

Eight years later, Monzo has matured. The brand’s user base now forms an army of 9.7 million customers, all wielding the firm’s famous coral-coloured bank card.

As a result, the firm has seen its deposits surge by 88% to £11.2 billion. Revenue has also jumped to £880m.

“In nine short years, Monzo has come from nowhere to a position where one in six UK adults has a Monzo account and we’re now the 7th largest bank in the UK by customer numbers,” Chief Executive Officer TS Anil said in a statement.

Monzo investments

Reaching the break-even point is one of the first signs that a fast-growth startup has become a fully-fledged business. But even at scale, Monzo is continuing to innovate.

Last year, it announced a new investment product with BlackRock Inc., named Monzo Investments. Users were able to invest in three different multi-asset funds managed by BlackRock directly through the app.

In future, it plans to expand into pension and mortgages products, to allow users to track their spending, saving, and investing in one place.

The firm is also investing internally. Monzo is currently hiring for 33 startup jobs this June, as it seeks to cement its market presence in the US.

Reportedly, the bank’s staffing expenses have risen by 47% during the year due to this supercharged recruitment drive.

The future of fintech?

Monzo’s new profitable status comes amid a tougher funding environment for UK fintechs. Decreased investor appetite saw funding levels drop by 37% in the first half of 2023.

Economic troubles have also made borrowing more attractive for Monzo users. Credit losses have grown by 75%, as customers lean into Monzo’s overdraft and credit lending features.

Despite this, and its new product launches, Monzo is prioritising profit alongside scale-up. The brand says it has made financial arrangements for bad loans worth up to 10% of its lending book.

Encouraged, cautious investors have now hedged their bets on Monzo. The brand raised £340m in March 2024, followed by a further £150m last month.

Ben Marrel, a venture capital CEO, told The Banker that Monzo has become a “beacon” that could serve “to reassure VCs who were previously hesitant about investing in bold fintechs”.