Digital-only challenger bank Monzo is facing a steep write down of its valuation as a result of the COVID-19 pandemic, according to a report in the Financial Times.
The FT reported on Friday that Monzo is in the final stages of negotiating a new round of funding that would value the business at £1.25bn ($1.5bn). That would mark a 40% drop from its most recent valuation of £2bn last year.
A spokesperson for Monzo declined to comment.
The FT said the COVID-19 pandemic was largely to blame for Monzo’s drop in value, with a decline in travel spending and other non-essential purchasing denting spending on Monzo’s iconic ‘hot coral’ debit cards.
Monzo CEO Tom Blomfield in late March agreed to waive his salary for the year, while other executives took 25% pay cuts to help manage costs. 300 staff were also asked to consider going on furlough.
The bank is said to be looking to raise between £70m and £80m to help see it through the current crisis.
As with almost every other sector, the COVID-19 pandemic has created serious problems for the banking industry. Major banks have set aside billions to cover an expected surge in losses, while digital challengers have been forced to adjust growth plans as customer spending has collapsed. Earlier this month Financial News reported that Monzo rival Revolut had laid off around 60 staff and Royal Bank of Scotland recently abandoned its own digital banking project Bo, citing resource pressure sparked by the pandemic.
Despite the disruption, Monzo is pushing ahead with plans to launch in the US. The Telegraph reported the startup applied for a US banking licence last month.
Founded in 2015, London-headquartered Monzo today has over 4 million UK customers. The company has raised over £300m in funding to date.