- The buzziest challenger banks in Europe are in a fundraising "arms race" as they gun for international expansion and growth.
- Revolut, Monzo, and Starling Bank are all challenging incumbent high-street banks in the UK and Europe, and the three are set to raise new tranches of capital.
- Monzo was reported to be in talks with SoftBank, but sources said the talks have not gone further.
- Revolut is set to close a new round of funding on Thursday at a $5 billion valuation, sources said.
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A buzzy trio of European challenger banks are set to raise fresh capital in what investors characterized as a funding arms race.
Fintech is Europe's hottest startup sector, with companies in the market raising more than $9 billion in venture capital in 2019, according to figures from Atomico.
Sources and media reports suggest that Revolut, Starling Bank, and Monzo - all popular neo-banks - are currently raising new cash as they chase growth and global expansion.
Sources say Revolut will close $1.5 billion in funding on Thursday
Revolut is the London-based startup which made its name with fee-free foreign exchange. It has more than six million customers, and sources told Business Insider it is set to close a round that will value the startup at $5 billion on Thursday.
Revolut last secured funding when DST Global led a $250 million investment at a $1.7 billion valuation in 2018. The new TCV round will make it one of the most valuable fintech companies in Europe.
Final details are as yet unclear but it's thought to comprise a $500 million equity raise from Silicon Valley fund TCV, as originally reported by Sky News, and $1 billion in debt which is being led by JPMorgan. That deal will value the startup, founded in 2015 by Nikolay Storonsky and Vlad Yatsenko, at $5 billion, per Financial News.
Revolut declined to comment. JPMorgan did not respond to requests for comment.
Despite the impressive numbers, it appears that Revolut won't hit its own valuation goal.
When news first broke of Revolut's potential fundraise in late 2019, the company had been eyeing a $10 billion valuation, according to The Telegraph.
But sources and media reports indicate the current fundraise will likely close at half of that $10 billion figure.
And according to one industry source, the $5 billion valuation is potentially even lower than Revolut's secondary share sale in summer 2019. That person said the sale took place at a mooted €5.5 billion ($6 billion) valuation, allowing early employees and investors to exit.
Sources dismissed rumours that coral-pink bank Monzo will raise funding from SoftBank
Monzo, the consumer bank that is rivalling UK high-street banks such as NatWest or Barclays, has gained popularity with younger consumers thanks to its easy-to-use app and "coral pink" debit card. The company says it has 3.5 million customers and employs around 1,500 staff.
The startup is also in talks for an extension to its $113 million fundraise from Y Combinator Continuity in summer 2019.
The Telegraph reported on Sunday that Monzo had been in funding discussions with mega-funder SoftBank.
But SoftBank has made negative headlines through 2019 thanks to its ties with Saudi Arabia, one of its major investors, and drama around its investments in Uber and WeWork.
Industry sources indicated that Monzo CEO Tom Blomfield didn't want to work with SoftBank. The meeting was thought to have taken place eight months ago, and Monzo has since met with a number of other investors to try and raise up to $130 million more at a valuation of $2.6 billion.
The upcoming round would help bring in new investors and help the startup boost its marketing budget ahead of a larger anticipated "Series G" round later in 2020.
Monzo declined to comment.
Starling Bank is in talks with an existing backer for more cash
Finally, two London-based sources indicated that Starling Bank, which has repeatedly shunned VC investment, is in talks with its backer Merian Chrysalis, for a new round of funding. Starling did not immediately respond to a request for comment.
It's part of what one London-based VC called an "arms race" for neo-banks. Those who scale fastest will win the race, as has been the case in mobility and food delivery markets. With competition from incumbents and other neo-banks, customer acquisition is key - and it's expensive.
One investor told Business Insider: "I think these types of company are in the same boat and will likely be in perpetual fundraising for the next two or three years until [they are] cash-flow positive."