The US regulator told Monzo that its banking licence was unlikely to be approved.
Banking licences are famously difficult to get, particularly when you are applying for one overseas—a story Monzo only knows too well.
After conversations with the Office of the Comptroller of the Currency (OCC) Monzo has made the decision to withdraw its application for its US operations.
The decision was made after regulators told the digital bank that its application was unlikely to be approved.
The news comes a year and a half after the bank first submitted its application, which can often take up to two years to approve and is very costly.
In a statement, a spokesperson for Monzo said: “While this isn’t the outcome we initially set out to achieve, this allows us to build and scale our early-stage product offer in the US through existing partners and invest further in the UK.”
“We have big ambitions for Monzo US. There are many routes to market we’re exploring that have been successful for other market entrants who are now major players.”
A spokesperson for the digital bank told AltFi that the decision will not impact its US plans, with Monzo still actively hiring in the US, and, while Monzo US is not a large scale operation, it still has high hopes for its stateside adventure.
Native digital banks in the US, like Chime, often go without a banking licence as higher card interchange fees make it more sustainable for fintechs to partner with fully licenced banks.
The withdrawal of Monzo’s application highlights the hesitancy the US regulator has towards fintechs, with just one fintech, Varo Bank, being awarded a full US banking licence to date.
Without the costs of its US banking licence, Monzo will refocus its attention to investing more in its UK operations.
Monzo had a tough pandemic, with its founder and CEO Tom Blomfield leaving the company back in May 2020 and its 2020 annual results casting “material uncertainty” over its future—a concern that still remained in its 2021 results.
On 7 May 2021, the FCA informed Monzo that it has “started an investigation into our compliance with financial crime regulation,” after initially telling the bank to appoint someone internally to oversee the initial review into its financial crime practices in August 2020.