Tencent joins backers of digital bank Monzo

4 Jan 2022

Image: © ink drop/Stock.adobe.com

The Chinese tech group has invested in the UK-based digital bank, adding another prominent investor to its latest funding round.

Chinese tech giant Tencent has taken a minority stake in Monzo after joining the digital bank’s latest funding round.

The UK start-up hit a valuation of $4.5bn in early December after raising $500m in fresh funding, but it has now been revealed that Tencent has invested as part of a $100m top-up to the $500m round. The news was first reported by Sky News.

This adds another well-known investor to the funding round led by the Abu Dhabi Growth Fund, which also led e-scooter company Lime’s $523m funding round in November last year. Monzo was also backed by new investors including New York-based Coatue.

“The high level of investor interest we’ve had in this round is testament to our performance as well as the huge opportunity that lies ahead,” said Monzo CEO TS Anil.

“With the backing of some of the best names in the investment community, we’re going into [2022] with big ambitions – and we’re just getting started.”

This funding comes after Monzo suffered significant losses last year and was investigated for anti-money laundering compliance shortcomings by a UK watchdog.

Despite the setbacks, Monzo claims to have doubled its revenue last year compared to 2020. The company now has more than 5m customers and said 100,000 are added every month. It told the Financial Times last month that its continued growth even during the pandemic helped investors gain confidence in the digital bank.

Monzo is Europe’s third most valuable neobank, behind Revolut (valued at $33bn) and Berlin-based N26 (valued at $9bn after a $900m funding round in October).

The UK-based digital bank is now focused on growing its user base, lending and boosting revenues, with the new funds going towards building products including its own trading platform and covering its burn rate, according to Sifted.

In September of last year, Monzo stepped into the increasingly competitive ‘buy now, pay later’ market with its own service, Monzo Flex, which allows users to spread the cost of their purchases over three months interest-free. In July last year, Monzo COO Sujata Bhatia also hinted at a possible IPO.

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Leigh Mc Gowran is a journalist with Silicon Republic