Welcome to CFTE’s Fintech Shot for October 11th, 2021. The first week of Q4 is finally over, autumn’s here and FinTech is buzzing with excitement- here’s some knowledge for your brain:

Monzo withdraws application for US Banking License

Oh what, Monzo’s not a bank?

Challenger bank Monzo has decided to withdraw its application for a US banking license, illustrating the challenges for European FinTechs entering the US. After two years of negotiations with the Office of the Comptroller of the Currency, Monzo has given up hope of securing a full banking license, after regulators told the start-up that it was unlikely to be approved.  It leaves us wondering is Monzo remaining an e-money institution a bad thing?

What is an e-money institution (EMI)?

Electronic Money Institutions are allowed to issue and redeem electronic money. Electronic money is a digital equivalent of cash stored on an electronic device or remotely at a server.

What’s the problem? Why did Monzo withdraw their application?

Regulators said it was unlikely to be approved which helped Monzo to realise the futility of their efforts. Moreover, it highlights how difficult it is for European EMIs to get banking licenses in the UK.

Why do they need a banking license in the US?

Monzo which is in the US, without a full banking license, is one of several so-called challenger banks that operate with only an ATM card and an app. Without a license they’ll need to continue to partner with a US bank to provide more services.

Our Take

  • How does this impact their future growth plans?
  • Dropping the push for a US banking license, allows Monzo to streamline and focus on their product offerings internationally as an innovative EMI. It could be a positive- that helps to create a more sustainable and effective business model.

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