UK neobanks, including Monzo and Revolut, are hungrily eyeing the massive, affluent but ultra-competitive American market. Monzo launched in the U.S. in 2022 via a partnership with Sutton Bank after an initial failed attempt to get its own U.S. banking license in 2021. Revolut also operates in the U.S. via partnerships, such as the one it has with Metropolitan Commercial Bank.
Both of the UK neobanks face hurdles getting a banking license in the U.S. because of questions about the robustness of their compliance systems, as well as, in Revolut’s case, concerns about its rapid expansion into high-risk financial services segments like cryptocurrency. It will be challenging for either of the UK disruptors to independently get a U.S. banking charter anytime soon.
Yet we do not expect Monzo and Revolut to give up on the U.S. market. A license enables the neobanks to offer core banking products like insured deposit accounts, overdrafts, and personal loans, which are currently limited or unavailable. Accessing deposits directly is key to building out both banks’ lending business, a major growth area. Further, a full banking license signifies regulatory compliance and builds customer trust, vital for challenging established U.S. banks.
In Revolut’s case, the company’s massive war chest—it is now valued at US$75 billion—means that buying an American bank is a viable option to speed up U.S. expansion, though it has been mum about acquisition targets and no relevant information has yet leaked. If the UK fintech giant buys an existing nationally chartered American bank, it will be able to operate nationally in the U.S. and would be one of the few native digital lenders with such a capability. Competitors like Chime Bank have to partner with incumbents and act as their technology service provider in order to operate like a nationally chartered bank.
As for Monzo, the company is financially stronger than it was in 2021, with scale at home, a clearer profitability story, and a more mature risk and controls stack. And in Washington, the mood music on charters and deals is marginally more receptive than it was during the last application. If successful, Monzo would shift from a sponsor-bank model to a fully chartered presence controlling deposits, credit, and economics end-to-end rather than renting access through a partner.
Looking ahead, both Revolut and Monzo should learn from the failure of the German neobank N26 in the U.S. N26 closed its U.S. operations in early 2022 to refocus on its core European market, citing challenges like high investment needs, fierce competition, regulatory pressures (especially from Germany’s BaFin regarding anti-money laundering controls), and a need to prioritize growth in Europe, where digital banking adoption was accelerating. The company found it difficult to gain market share and achieve profitability in the U.S. without its own banking charter, relying instead on partners like Axos Bank.
Putting aside the banking charter issue, since both Revolut and Monzo realize the importance of obtaining the license, N26 struggled to differentiate itself in the intensely competitive U.S. banking market. Revolut and Monzo should not underestimate this challenge.
Many of Revolut’s core digital services, such as multi-currency accounts and low-fee transfers, are now offered by other neobanks and even traditional high-street banks. The “freemium” business model has become common.
Monzo also faces differentiation challenges. Many users see it as a secondary spending account, not a primary bank, despite its cool branding (hot coral card) and budgeting tools. Rivals and traditional banks have copied its core features like instant notifications and card controls.For Monzo, one promising area is the growth of its business banking customers. The digital bank has now surpassed 800,000 business customers—equivalent to one in seven SMEs in the UK—after business sign-ups rose roughly 50% year-on-year. To support this momentum, Monzo will soon introduce a new tax filing tool enabling sole traders and landlords to submit tax returns directly to HMRC through their business account