Dive Brief:
- Monzo, a neobank based in the U.K., is in talks with Danish peer Lunar about a potential acquisition, according to Bloomberg and Reuters, which cited sources familiar with the matter.
- The British fintech is eyeing a deal with the Denmark-based firm to help it expand in Europe, sources told the two publications.
- The reported merger talks come as rising interest rates and a drop in venture funding have created a difficult environment for fintechs and neobanks, drawing speculation that consolidation will be necessary for startup financial firms to scale.
Dive Insight:
Deliberations between the two firms are ongoing, and there is no certainty a deal will materialize, sources told Bloomberg.
In addition to Lunar, Monzo is exploring other potential acquisition targets that would help fuel its European expansion plans, sources told the wire service.
Lunar has over 650,000 users across Denmark, Sweden and Norway, according to the London Evening Standard. The company was valued at $2.2 billion last year, according to TechCrunch.
Monzo, which launched in 2015, has 7.4 million customers, making it the seventh-largest bank in the U.K. by client numbers, according to CNBC.
Boosted by the addition of lending and subscriptions, the company hit monthly profitability for the first time this year, CNBC reported in May. For the year ending February, the neobank reported a net operating income of £214.5 million ($266.1 million), almost doubling year-over-year from £114 million, according to CNBC.
The company’s London-based competitor Starling Bank hit profitability for the first time in 2021, the outlet reported.
Reports of a potential merger between Monzo and Lunar come as consolidation and closures have hit several U.S.-based affinity neobanks in recent months.
Greenwood, which targets Black and Brown communities, acquired fellow mission-driven fintech Kinly in May. Other digital banking platforms such as the LGTBQ-focused Daylight and money transfer fintech Remitly’s Passbook have shuttered this year.
