Blockbuster neobank M&A: Monzo to acquire Nordic digital bank Lunar ๐ฌ๐ง๐ค๐ฉ๐ฐ; India could be the next BIG Thing for Apple Pay ๐ฎ๐ณ๐; Should banks worry about the launch of FedNow? ๐ค
FinTech is Eating the World, 13 July
Hey Everyone,
Happy Thursday! Todayโs issue is the best one yet. You will see this yourself as weโre looking at a blockbuster neobank M&A as Monzo is keen to acquire Nordic digital bank Lunar (why it makes sense, how to get M&As right & a deeper dive into Monzo), India that could be the next BIG Thing for Apple Pay (why + a deeper dive into Apple as the first Super App of the West & how PhonePe is building the Google of India), and see whether banks should worry about the launch of FedNow (itโs so close!) ๐ค Letโs jump straight into the thrilling stuff ๐ถ
Blockbuster neobank M&A: Monzo to acquire Nordic digital bank Lunar ๐ฌ๐ง๐ค๐ฉ๐ฐ
The HOT news๐ฅ UK challenger bank Monzo is reportedly in talks over a merger with its Nordic equivalent Lunar, according to reports from Bloomberg.
The preliminary discussions are taking place not long after Lunar raised โฌ35 million in funding from insidersย back in February.
More on this ๐ The deal reportedly arose from Monzoโs desire to expand into Europe.
Bloomberg described the discussions as preliminary with no guarantee a deal would be reached, and that Monzo is also exploring other potential targets in Europe.
The USPs ๐ฅ Both neobanks are somewhat similar but operating in different markets:
Britainโs flagship digital bank Monzo was last valued at $4.5 billion after raising $475 million in late 2021. Having more than 7.5 million customers, in May Monzoย reportedย that it had already reached profitability โ at least for the first two months of the year โ and expects to reach full-year profitability by the end of 2024. A jump in its lending business, where volume nearly tripled year-over-year, spurred the company to profitability.
ICYMI: The Monzo Pivot, or how challenger bank transformed itself in just 2 years ๐
Lunar offers retail and business banking services in Denmark, Sweden, and Norway, with a proposition broadly similar to that of Monzoโs in the UK and US. Last year Lunar raised โฌ70M from existing investors including Tencent, Heartland, IDC Ventures, and Kinnevik, with an additional โฌ35M raised this February, rounds that reportedly came at a $2.2 billion valuation. The bank also has the backing of Hollywood actor Will Ferrell, who invested in the business and starred in one of its marketing campaigns last year.
โ๏ธ THE TAKEAWAY
Making sense of itโฆ ๐ง Monzo is strong in the UK only while Lunar is mainly a Danish neobank. Also, given Lunar operates in non-Euro countries, itโs hard to justify this as the European expansion strategy (at least target EUR countriesโฆ). Hence, from first sight, Iโm not entirely sure how this can work out... On the other hand, Nordic markets are less saturated with neobanks, so there might be more opportunities to grow vs. say continental Europe where you have Revolut, N26, and others. Also, we must remember that Lunar acquired Lendify and Paylike in the last couple of years, so Monzo might be looking at a bigger play in lending (and banking is all about lending!). Therefore, if they can successfully integrate and convert Lunar and their users to the Monzo brand, this could be a great opportunity to grow through M&A. Looking at the big picture, itโs yet another signal of growing M&A activity in the neobanking sector, as firms find it harder to raise fresh capital due to a combination of rate hikes, investor caution, and unclear macroeconomic situation.
The critical point here is to get the M&A right. And itโs all about the numbers. Use this to not miss a thing:
Bonus: Monzo's license-less US expansion. Smart move or just foolish? ๐ง