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UK challenger Monzo in talks with SoftBank for £100m fundraising

Monzo, the UK challenger bank valued at $2.7 billion last June, is on the look out for another funding injection.

Co-founder Tom Blomfield is understood to have met senior executives from SoftBank’s Vision Fund twice, according to Telegraph sources.

As part of its plan for US expansion the neobank is seeking to raise around £100 million ($113 million), following its £113 million investment from US fund Y Combinator Continuity in June 2019.

Blomfield first met investors from SoftBank more than a year ago, and just earlier this month the challenger bank visited the Japanese investor’s offices in Mayfair, London. Talks are still at an early stage and a funding deal has not yet been signed. Spokespeople from both companies have declined to comment on the meetings and anticipated funding.

The investment will likely come from SoftBank’s second Vision Fund

The investment will likely come from SoftBank’s second Vision Fund, which was initially planned to raise $108 billion but to date the only confirmed investor in the fund is SoftBank itself with a $38 billion pledge.

SoftBank has taken an interest in various other European fintech start-ups. The investment group also opened up talks with one of Monzo’s biggest competitors in the UK – Revolut – last year, and it plugged an eye-watering $1.46 billion into UK-founded supply chain finance lendtech Greensill between May and October 2019.

Read more: Barclays invests in digital receipts start-up Flux

Monzo’s performance against incumbent UK banks is looking promising. In the third quarter of 2019, Monzo acquired 22,841 new customers. In the same period 1,265 people left the bank according Pay UK figures. In other words, the challenger bank attracted 18 new customers for every one that it lost.

This can be compared with HSBC, which lost nearly 29,000 customers over the same period. Monzo now claims to have 3.6 million customers and 1,500 employees, according to a job listing cited by Bloomberg.

The UK challenger’s biggest competition in the US will be Chime, a neobank which managed to quadruple its valuation in less than a year to $5.8 billion from $1.5 billion in 2019.

Chime’s new valuation – revealed in December by CNBC – followed a $500 million Series E funding round which was the largest individual equity investment for a challenger bank ahead of Brazilian challenger NuBank’s $400 million fundraise in July 2019.

Read next: API builder Teller raises $4m to challenge Plaid

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