Monzo Bank Ltd., the UK mobile bank, is exploring a potential combination with Nordic peer Lunar Group A/S as it looks for ways to expand in Europe, people familiar with the matter said.
(Bloomberg) — Monzo Bank Ltd., the UK mobile bank, is exploring a potential combination with Nordic peer Lunar Group A/S as it looks for ways to expand in Europe, people familiar with the matter said.
London-based Monzo has been holding preliminary discussions with the Danish company about the structure of a possible deal, the people said, asking not to be identified because the information is private.
Lunar last raised funds in 2022 at a valuation of about $2.2 billion, according to data provider PitchBook. Its investors include Kinnevik AB, Tencent Holdings Ltd., Greyhound Capital and Socii Capital. Many fintech companies have seen their valuations fall dramatically since that time amid rising interest rates and declining risk appetite.
A 2021 fundraising for Monzo valued the firm at $4.5 billion. It brought in money from new investors like Abu Dhabi Growth Fund, Coatue and Tencent as well as existing shareholders including Accel and General Catalyst.
Monzo has also studied other potential targets that would help it expand in Europe, according to some of the people. Deliberations are ongoing, and there’s no certainty it will proceed with a deal, the people said.
Representatives for Monzo and Lunar declined to comment.
Mobile Services
Monzo, known for the bright coral color of its debit cards, was founded in 2015 as a challenger to traditional British lenders’ dominance of retail banking in the country. It now has more than 7.5 million customers using its mobile app, and the company has been able to narrow losses and boost revenue by expanding into loans and business services.
Also founded in 2015, Lunar serves more than 650,000 customers in Denmark, Sweden and Norway. The bank, based in the Danish port city of Aarhus, is fully digital with no branch network. It has raised more than 2.3 billion Danish kroner ($309 million) from investors since inception, according to its website.
Neobanks like Monzo and Lunar are part of a fast-growing financial technology industry that also includes zero-commission brokers, online investment advisers and “buy now, pay later” lenders. Venture capital firms have poured billions of dollars into these companies as they build to disrupt the financial services industry.
But as many incumbent providers adapt their own business models for the digital age, many predict banking startups will need to consolidate in order to achieve scale and stay competitive.
–With assistance from Aisha S Gani, Sanne Wass and Mark Bergen.
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