Challenger bank Monzo has hit a valuation of $4.5 billion with a new $500 million funding round

• London-based digital bank Monzo is set to raise $500 million in a new funding round.
• The deal values the fintech at $4.5 billion, with new investment coming from the Abu Dhabi Growth Fund.

Challenger bank Monzo has raised fresh funding that pushes its valuation to $4.5 billion, led by the Abu Dhabi Growth Fund.

Monzo's new funding round was $4, when sources said the challenger bank looking to raise at least $400 million at a valuation of at least $4 billion. Other new investors in the round include N26-backers Coatue and Alpha Wave Ventures.

The fintech, which was founded in 2015, on Wednesday confirmed a $475 million first close at the new valuation, anticipating a total of $500 million.

The valuation reflects a marked improvement in Monzo's fortunes. The bank took a hammering in the early stages of the pandemic, and its business was further jeopardized by a planned funding round in March 2020 that fell apart. Founder-CEO Tom Blomfield stepped away at the beginning of 2021, citing his mental health, and was replaced by US boss and former Visa exec TS Anil.

The startup announced 120 job cuts that summer, and posted swelling losses for the year of £113.8 million ($150 million). It successfully raised a $4, but took a 40% valuation haircut to around £1.25 billion ($1.6 billion). It later secured an $4 at the same valuation and another $4.

Even with new funding, the firm is set to lag its fintech peers on valuation.

UK competitor Revolut raised at a $33 billion valuation in July in a round led by SoftBank and Tiger Global. German challenger bank $4 in fresh cash at a $9 billion valuation from Third Point Ventures and Coatue Management.

Android app download data reported by Insider last month indicates that $4, outpacing other challengers and established banks this year. Monzo and some of its other digital banking peers by contrast experienced a slowdown in downloads this year.