Fintech startup Monese is moving further into bank territory (and toward profit) as digital challenger space hots up

Lynsey Barber
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Monese offers mobile-only current account (Source: Getty)

Monese, a fintech startup backed by a well-known Spotify investor, has moved a step closer to rivalling major banks with the launch of direct debits, its first step in plans to expand.

The digital challenger bank which offers mobile current accounts aimed at expats, immigrants and "nomads" who otherwise find it difficult to bank with the traditional high-street giants, has added the new feature due to high demand from its users. More than 75 per cent use Monese as a primary account into which they pay a salary.

It will also let users, which now number "near six figures", pay in cash at the more than 10,000 Post Offices around the country in a new partnership.

Read more: This Goldman Sachs-backed fintech wants to become the Alipay of Europe

The startup first launched in 2015 and has an e-money license to offer banking-like services. Customers can already pay bills, send money and get a contactless debit card with the account for a flat fee of £4.95 per month.

Chief executive and founder Norris Koppel told City A.M. the London headquartered startup will soon become profitable solely from charging the monthly fee “in the next 12 months or earlier”.

“It comes down to, we’re not offering free services and burning venture money just to get customers who are dormant. We have customers who actually need the product,” he said.

“We believe strongly we are differentiating ourselves on serving customers who typically are not served. As long as we focus on that, it’s something that gives us an advantage. And I think we’ve proven that already compared to rivals,” he said.

Several of the UK’s digital challenger banks are ramping up operations and readying for launch this year in an increasingly competitive environment.

“Our customers are using it as main or primary current account. Others that do it for saving customers money, typically see lower engagement, and are a secondary account. Ours are not using any other current accounts or bank services. In a competitive landscape that’s what makes us different,” he added.

Another advantage for Monese is the focus on identification. It can open accounts within two minutes using "bank-grade KYC" (know your customer) checks, and not just in the UK. Banks are tied to certain processes and legacy systems particular to each country when it comes to credit and identity checks, said Koppel. The startup has been approached by banks interested in its KYC process, he added. Banks are also traditionally looking for customers they can lend to, leaving an opportunity for those being under-served by the bigger institutions.

Monese plans to launch elsewhere in Europe later this year after raising $10m (£8.2m) in January from Anthemis Exponential Ventures, Korea Investment Partners and STE Capital. It follows on from a $1.8m in the summer of 2015 from Seedcamp, SmartCap along with entrepreneur and Spotify investor Shakil Khan.

Read more: Revolut rolls out business banking

It’s not currently fundraising but plans to do so in the “next year or so” to fuel further growth. In addition to expansion in Europe, adding more services such as savings and credit in addition to the core current account is "perhaps something to consider in future" for the fintech firm. That will not entail becoming a full bank, however.

"The way we want to operate is a light current account. If we want to remain light, acquiring a bank license would be too much time and money. It's best for our customers to partner with others," said Koppel.

Monese employs 80 staff in Tallinn, Estonia, and Shoreditch and will continue to keep its HQ in the capital despite the UK’s vote to leave the European Union.

While an “inconvenience that’s for sure” Koppel said: “ There’s no reason for us to move out of the UK. Historically London’s been one of the top cities with lots of talent and great for fintech. We plan to to stay here, it doesn't’t matter, Brexit or no Brexit.”

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