Monzo, one of Europe's hottest neobank startups, wins 200,000 customers a month without marketing. Now it's coming for the US.

• Fast-growing challenger bank Monzo has 3.8 million customers in the UK and wants to scale into the US soon.
• Founded in 2015, London-based Monzo has attracted a loyal following from customers with its bright coral pink debit cards and easy-to-use banking app.
• Monzo announced its US launch in June 2019, but says it will take the rollout slowly.
• "The needs of the consumer in the US are different," Tom Blomfield, Monzo cofounder and CEO told Business Insider in an interview. "We have to get the product market fit right and that's a discovery iteration that we are embarking on right now."
• Click here for more BI Prime stories.

Five years ago, the company that would become Monzo was incorporated in London. Fast forward to the present day and the challenger banking startup has 3.8 million customers with 210,000 joining in January 2020 alone.

Known for its bright pink coral debit cards, Monzo is a UK-based neo bank which provides a number of financial services to consumers ranging from a current account to saving pots and access to loans. The company's growth in the UK has been astonishing, the brand started out as something of an elite club with a long waiting list for access but has now become one of the leaders in the crazily competitive fintech marketplace.

Formerly known as Mondo, the firm changed its name to Monzo in 2016 thanks to a copyright challenge.

As a newcomer, Monzo remains comparatively small compared to the UK's roster of high street banks, namely RBS, Barclays, HSBC, and Lloyds. But its strength is the fierce loyalty of its customers, and Monzo boasted the highest net promoter score of any UK bank in 2018 with +80. The average UK banking score was just +4 in 2017. Monzo's loyal customers have continued to provide word of mouth referrals, meaning that with the exception of a TV ad campaign in the summer of 2019, the startup spends little to no money on marketing.

The high-street banks are rattled, and have tried to ape Monzo's success by launching their own challenger banks, with mixed success. RBS launched its digital-only bank, Bó, in November 2019 but reportedly lost its CEO within a month.

The question now is whether Monzo will have the same success in the US market, where many of its peers are jostling for position as well.

Monzo has won religiously loyal millennial users in the UK

"The needs of the consumer in the US are different," cofounder and CEO Tom Blomfield told Business Insider in an interview. "We have to get the product-market fit right and that's a discovery iteration that we are embarking on right now."

Monzo first announced its US expansion plans in June 2019.

Blomfield notes that it took Monzo two full years of operation to get 50,000 users in the UK and would be happy with that in the US, to begin with.

Monzo now has a US CEO, former Visa global head of payments TS Anil, who will lead the startup's operations stateside. The company doesn't plan on splashy marketing spend to win customers, a tactic employed by rivals such as German peer N26. The Berlin challenger bank launched a US marketing campaign in September and now has 250,000 customers in the US and five million overall.

Other challenger banks like Revolut are also targeting the US market while domestic challengers like Chime continue to thrive.

Monzo's CEO talks about sustainable growth, not growth at all costs

Westward expansion can take many forms for European tech startups but an aggressive approach doesn't currently appear likely for Monzo.

Blomfield is keen ensure a receptive regulatory environment before rushing into the US market. He points to the recent decision of the FDIC (Federal Deposit Insurance Corporation) to give San Francisco fintech approval for deposit insurance as a positive sign for other disruptors.

"We are very ambitious," Blomfield added. "We want to create a sustainable business that improves peoples' lives."

Monzo's UK growth has been impressive, though the firm remains loss-making for now.

The startup lost £47.2 million ($61 million) in 2018 and Blomfield says it will continue to be loss-making for the next two to three years. However, the expectation is that those losses will remain in the millions rather than the billions.

Blomfield stresses that the company's aim is to become profitable in a matter of years. Last September, the company rolled out paid accounts but abruptly stopped that plan. The next step will likely see the startup move further into loans, where it currently lends out around £120 million against deposits of £2 billion.

Similarly, Monzo has steadily pushed customers into transferring more of their banking needs to the company. Schemes like its gambling block were well received while the startup also offers users the ability to have their salary paid a day early. The company's annual report for 2018 notes that "The longer customers are with us,
the more profitable they become, and salaried users contribute +£30 - mainly driven by the money we make when people use their Monzo cards." This figure will likely increase in the future.

In the meantime, the company will continue to rely on external funding. Monzo has raised $421 million to date at a believed $2.5 billion valuation, with its last round coming in July 2019 from Y Combinator Continuity. The startup is said to be in talks to raise up to $130 million, having met with a number of investors - including SoftBank - in the past year. Blomfield declined to comment on potential fundraising.

The company's headcount tripled from 500 to 1,500 in 2019 with Blomfield expecting at least another 100 staff to join Monzo's head office in 2020. Blomfield believes the startup will be one of the winners in the UK banking market in the future and estimates there could be another 100 million customers available in the US.

"I think the whole world is going to move on to digital banking in the next 10 years so you're targeting
approximately 7 billion people and I think you will get winners per geography," Blomfield said. "Getting big for the sake of it isn't the goal."

NOW WATCH: Samsung's Galaxy S20 and Galaxy Z Flip event in 7 minutes