Digital bank Monzo has abandoned plans to acquire a US banking license as it became clear it would struggle to gain approval from regulators.
A spokesperson for the bank said: “Following our recent association with OCC, we have decided to withdraw our banking license application for our US start-up. However this is not the outcome we initially set out to achieve. This allows us to build and scale our early stage product offering in the US through existing partners and to invest further in the UK.”
news was First reported by the Financial Times. The paper said the bid was dropped as it became clear that the Office of the Comptroller of the Currency (OCC) would not support the loss-making bank’s bid.
Monzo said it is still committed to expanding in the US and will do so through its existing partnership with Ohio’s Sutton Bank, rather than as a standalone lender.
“We have big ambitions for Monzo US,” a spokesperson said. “There are several avenues to market that we are exploring that have been successful for other market entrants who are now major players.”
Monzo first applied for a US banking license in April 2020. Regulators in the US take a tougher stance on banking license approvals than UK watchdogs, in a move to boost competition in the banking sector after the 2008 financial crisis.
The background of the abandoned bid is a tough 18 months for the lender. Monzo was forced to lay off employees and accept cut price valuations in a funding round last year due to declining revenue during the pandemic. The deficit rose 13% to £130 million last year. The startup has also uncovered an investigation by the UK’s Financial Conduct Authority into anti-money laundering control lapses.
Monzo recently launched new products such as Buy Now, Pay Later and Pay For Accounts in a bid to get back on a similar keel. The company says that revenue has improved in recent months and has put Monzo on the road to profitability.
Monzo’s rival Revolt is also applying for a US banking license and is expected to have clarity on its application by early next year.