Revolut and Nubank want to make neobanking their world
Nubank’s takeover talks with Monzo shocked the City. In this week’s column, Samuel Norman takes a look at how and why a deal might emerge and the battle that lies ahead with Revolut.
Around a decade ago, a handful of colourful plastic cards found their way into Brits’ wallets.
Monzo was one of the first, in 2015, with its infamous neon-coral – though it was then under the moniker Mondo. Revolut launched the same year, though it had not adopted its sleek black appearance yet. Back then, Nik Storonsky preferred a purple-pink ombre. Starling, founded in 2014, launched its banking app in 2017 with its baby-blue physical card.
A flurry of other colours were also joining the banking rainbow. Digital bank Oaknorth, which sports a mint green offering, began serving British small businesses in 2015. This was followed up by dark blue Tide, which launched in early 2017. Years later the neobank momentum hadn’t slowed down with turquoise Zopa entering the market in 2020 and JP Morgan’s Chase arriving to UK consumers the year following.
The choices for consumers were far-reaching. The space for new market entrants was shrinking. So much so there were zero new UK banking licence applications in 2025.
But the well-saturated digital banking market is operating in a different environment to the days of post-covid high rates that helped them swing into profitability. And the neobanking rainbow could be at the risk of losing a few shades.
One potential loss that shocked the City over the weekend was reports that Monzo was in talks for an up to £10bn sale to Brazil’s Nubank. The deep purple Brazilian neobanking giant is headquartered in São Paulo and listed on the New York Stock Exchange with a mammoth $59bn market cap. It has little operations in Europe and none in the UK.
Should a deal, which is still in the early stages of discussion, take place, it would tee Nubank up to go toe-to-toe with Revolut on another continent. Revolut is expected to be valued at $115bn (£87bn) following a secondary share sale, dwarfing its European peers. In the Western market, only Nubank is a comparable peer.
Revolut and Nubank to battle in different markets
Europe’s largest fintech had been heading for a battle with its Latin American equivalent after both received conditional approvals for their US banking licences this last year. Globally, Nubank has 140m customers compared to Revolut’s 80m.
“Buying Monzo could widen Nubank’s emerging contest with Revolut beyond the US, where both are building banking franchises, and expose fundamentally different expansion models,” Bloomberg Intelligence’s Tomasz Noetzel said.
In a far cry from Revolut, the engine behind Nubank’s balance sheet is credit income. The firm closely mirrors the efficiency of a traditional bank, gathering cheap customer deposits and lending with high-yield credit cards. Credit income made up nearly 59 per cent of the firm’s $16.3bn in revenue in the last year.
Revolut, however, has developed into a financial supermarket, offering the likes of multi-currency accounts, stock trading, crypto, eSIMs, and soon airport lounges. It is a model the UK has warmed to and Revolut landed its full-fat banking permit earlier this year giving it permissions to beef up some of these operations.
Nubank could take hold of Monzo’s deposits
Organically, Nubank might have had a headache trying to find its way into the rainbow world of British banking with a model not favoured by its neobanking peers. Perhaps their top brass thought the same and saw a potential Monzo deal as a major leg up. The UK darling’s £25.7bn in deposits opens an avenue to shift into higher-return credit, something Nubank’s model would be able to jumpstart, albeit at a different rate under UK regulation.
A deal would also fall in line with a strategy deployed by the Latin American group. Nubank holds one full banking licence in Mexico and has used a string of acquisitions to expand its reach across wealth management (takeover of Easynvest in 2020), personal finance (Olivia takeover in 2021), and e-commerce (Spinpayments in 2021). On the other hand, Revolut – which has not yet made any M&A – has used licences to deepen its monetisation, holding six fully-stamped permits across Lithuania, UK, Mexico, France, Australia and Colombia.
Where the rest of the banking rainbow ends up in this case is anyone’s question.
And what for Monzo? Hopes in the City have remained high the firm would be one of the first movers to get the pipeline of home-grown fintechs onto the public market. And many of its early investors were keen to back a British success story.
A boardroom reshuffle over the last year no doubt helped derail any plans. The departure and subsequent return of TS Anil would have done little to build a strong narrative to sell to investors, and that was before the departure of chair Gary Hoffman, one year earlier than his term requires.
One City dealmaker told me several firms had been eyeing Monzo as a potential first mover.
“If something happens to the one pegged to be a first mover… everyone takes a hit… there’s an impact,” they added.
They suggested if the firm was to float “everybody would need to settle down and calm down if they want to get the IPO right”.
But now, the prospect of a deal values Monzo at roughly 2.5x the £4bn valuation clinched in 2024. Shareholders might much rather get excited for a worthwhile exit with Nubank rather than quieten down for an IPO.