Fintech industry observers are monitoring Monzo’s developments closely as the fast-growth personal finance app stated that COVID-19 impacts have led to ‘material uncertainties’, casting doubt over the group’s ‘ability to continue as a going concern’.
Publishing its 2020 corporate accounts, Monzo revealed that its operating losses had more than doubled to £114 million from its previous 2019 losses (after tax) of £47 million.
Fintech observers noted that the sharp drop was further compounded by a ‘moderate’ increase in group revenues to £67 million (from FY2019 £20m), indicating underperformance against Monzo’s high-growth expectations.
Analysis of Monzo’s woes has been far-reaching, with UK finance news sources underlining that the firm’s growth strategy could be overextended in servicing 5 million UK current account customers, whilst maintaining limited revenue-generating streams – premium subscription accounts, overdraft and ISA saving % charges.
2019 saw Monzo launch its lending service, which has grown to £143 million as reported in its full-year accounts. Further concerns are raised by Monzo citing that it anticipates 2020 credit losses to climb to £20 million from £3.9m.
Safeguarding its business against covid uncertainties, Monzo has placed £4 million aside to protect against a ‘heightened default risk associated with coronavirus.’
The firm’s difficulties navigating the covid complexities have been previously reported, as last month the Fintech group raised £58 million in working capital from its investors at a 40% discount to its 2019 valuation.
In its statement, Monzo leadership acknowledged that ‘macroeconomic uncertainties’ combined with stricter regulatory demands, could result in lower customer take-up of its services, impacting its revenue streams and how it executes its long-term growth strategy.
It added: “This increases the risk that the Group will not be able to execute its business plan, which could adversely impact its ability to generate a profit or raise sufficient capital to meet future regulatory capital requirements.”
During lockdown Monzo reshuffled its leadership framework, promoting former VISA executive TS Anil to CEO as company founder Tom Blomfield transitioned to President and tasked overseeing the firm’s international expansion projects.
Commenting on the firm’s outlook, Anil maintained that Monzo carried ‘investor confidence’ having secured a vital funding round during the pandemic.
However, facing uncertain times, Anil stated that Monzo would develop a deeper discipline on cost controls in relation to its expansion – as the company reduces UK headcount and administrative expenses.
Outlined as a further key objective, Monzo product development teams will focus on creating new direct revenue-generating verticals, amplifying Monzo’s current product portfolio.
Signing off Monzo’s statement, Anil said: “Similar to many businesses, we’re seeing a significant impact from COVID-19 and the resulting economic downturn. While I’m confident these are short-term, we’ve taken decisive measures to reduce the financial impact.”
“Over the coming months, we’ll launch powerful new products that help people manage their money better, as well as drive revenue, and cement our place as the UK’s most recommended and fastest-growing bank.”