Challenger challenge: Monzo aborts US banking licence application
Monzo has followed in rival Robinhood’s footsteps and abandoned its application for a US banking license after regulators told the UK fintech it was unlikely to be approved.
In a major setback for its international expansion plans, the challenger bank said it had decided to withdraw from the process after recent talks with the Office of the Comptroller of the Currency, and that the decision “isn’t the outcome we initially set out to achieve”.
Monzo had originally applied for a full banking license in April this year, in the hope of being able to fend off competition from other challenger banks moving into the US by lending to stateside customers and offering fully insured deposit accounts.
It’s the latest sign of the hurdles fintechs face when trying to disrupt the financial system in the US, where regulators are significantly more reluctant to allow the loss-making companies to become fully-fledged banks than in the UK, where dozens of fintechs have been granted full banking licenses in a bid to drive competition in the sector.
Challengers will be hoping that they can tap into the higher card fees in the US as they look to turn a profit.
But the move has not dented Monzo’s “big ambitions” for its US business, the challenger bank told the Financial Times, who first reported on the withdrawal.
London rival Revolut, which became the UK’s most valuable fintech after its latest funding round earlier this year, also submitted an application for a US banking licence this Spring.
The pair of challenger banks have announced product expansions in tandem before, including their almost simultaneous launch of buy now pay later services lat month, as fintechs rush to capitalise on clear signs that online shopping is here to stay post-pandemic.