Monzo, one of a number of “challenger” banks in the U.K. aiming to re-invent the current account, has announced the first step in its plans for international expansion with news that it has regulatory approval to operate in the Republic of Ireland.
The move takes advantage of so-called ‘passporting’, a European-wide arrangement that sees similar regulation mirrored across the European Economic Area’s 27 member states, helping to create something akin to a single market for financial services. It echoes a similar move by competitor Starling Bank, which passported to Ireland in June.
Having achieved a U.K. banking license last April — and certainly while the U.K. remains a member of the EU — Monzo is eligible to apply for additional passporting rights for other EEA member states, although I’m told Ireland was chosen first since it has a similar banking culture and products to the U.K. and, of course, a shared language.
Notably, Monzo has no immediate plans to open an office in Dublin or anywhere else in Ireland, although that could change should Brexit bring an end to passporting of financial services.
“We’re keeping a close eye on developments: we don’t yet know the exact terms under which the U.K. will leave the EU, and therefore how any form of financial services passporting or equivalence will work after Brexit,” Thomas George, Head of International at Monzo, tells me.
“In the future, we may decide that we need to open a full subsidiary or obtain a direct banking licence in Ireland or another EU country”.
Meanwhile, despite today’s news, Monzo co-founder and CEO Tom Blomfield has made no secret of the challenger bank’s mid to long term ambition to set up shop in the U.S., and potentially in preference to wider European expansion.
That might seem counterintuitive given how divergent the U.S. is with regards to financial services regulation across states, especially compared to Europe’s single market vision, but Blomfield has repeatedly argued that not only is it a huge market but one that is crying out for a new kind of bank account. It also doesn’t pose the same language and cultural barriers that most of mainland Europe does.
Explains George: “Ireland is a great first step for Monzo: there’s no language barrier, there are strong cultural similarities, and the way people use banking products is similar. But as Tom [has previously] said, expansion into the rest of Europe would require us to build multi-language support, and make other changes to the product to meet local customer needs”.
In contrast to Europe, George notes that the U.S. has cultural similarities and a common language with the U.K., whilst banking in the U.S. is fragmented and expensive for consumers, and there has been virtually no new banks authorised over the last decade.
“As a result, we think that there’s demand for new products and services that give people more choice. But the process for getting approved in the U.S. is likely to be lengthy and expensive, so this is likely to be a longer-term project,” says the challenger bank’s Head of International. “We have ambitious plans for growth, and international expansion into various markets will play a big part in that, so we’re exploring all our options”.
In the interim, Monzo has been assembling an impressive array of U.S. investors. The London-based startup’s most recent round, which gave the company a £280 million post-money valuation, saw the likes of Goodwater Capital, Stripe, and Michael Moritz invest. Prior to that, Thrive Capital became a backer and TechCrunch recently learned that Instagram co-founder Kevin Systrom has also invested in the challenger bank.