UK digital bank startup Monzo turns profitable for the first time after 9 years of operation

British digital bank startup Monzo posted its first-ever annual profit after nine years in business. In an announcement on Monday, Monzo revealed that its pre-tax profits for the fiscal year 2023-2024 totaled £15.4 million ($19.6 million), a significant turnaround from the previous year’s loss of £116.3 million.

The surge in profitability can be attributed to various factors, including a notable increase in revenue, which more than doubled to £880 million during the same period. This uptick in revenue is likely a result of several contributing factors, such as higher interest rates and a rise in income derived from transaction fees and subscriptions.

Monzo’s journey to profitability has been marked by notable milestones. Just last year, the company reported its first month of profit, signaling a positive shift in its financial trajectory, CNBC reported. This turnaround is particularly significant considering the challenges faced by Monzo in 2020 when concerns were raised about its viability amidst the early stages of the Covid-19 pandemic.

Despite its rocky past, Monzo has experienced significant growth, evidenced by its current valuation of $5.2 billion. This valuation was bolstered by the success of its investment products developed in collaboration with asset management behemoth BlackRock.

However, amidst the celebratory atmosphere, there are cautionary notes to consider. Monzo has observed a notable increase in provisions for potential loan defaults, indicating a rise in credit losses. This trend suggests potential challenges in managing its loan portfolio, possibly stemming from difficulties faced by customers in repaying debts.

Nevertheless, Monzo’s achievement of profitability is a promising sign for the future of the digital bank. It underscores the company’s ability to strike a balance between customer-centric operations and financial success. With ambitions to expand into the European market, Monzo appears well-positioned for sustained growth in the foreseeable future.

Founded in 2015 by visionary entrepreneurs including Tom Blomfield, Gary Dolman, and Jason Bates, among others,  Monzo has emerged as a trailblazer in the digital banking arena. With its user-friendly mobile app and commitment to innovation, Monzo has amassed a loyal user base exceeding 2 million customers, a number that continues to soar with each passing month.

Tom Blomfield, the driving force behind Monzo’s meteoric rise, envisions further exponential growth, projecting a user base of 3 million soon. In a fiercely competitive landscape dominated by rivals like Revolut and Plum, Monzo stands out for its seamless user experience and laser-focused appeal to millennial demographics.

Monzo CEO TS Anil. (Credit: Monzo)