The fintech sector in London is grappling with a severe cash crunch, as evidenced by the recent warning issued by Monese, a City-based unicorn that offers current account and money transfer services. Monese, which boasts major shareholders like PayPal, HSBC, and British Airways owner IAG, revealed in its latest filing with Companies House that its future is at risk unless it secures additional funding.
Monese disclosed a loss of £30.5 million in 2022, marking a staggering 70% increase from the previous year. This figure surpassed revenues of £27.7 million during the same period. While the company reported a reduction in losses to single-digit millions in 2023, an exact figure was not provided. The financial uncertainty has led Monese to express doubts about its “going concern” status, citing the challenges of future fundraising.
Norris Koppel, CEO of Monese, acknowledged the losses, attributing them to significant investments in the company’s technology platform. Despite the financial setbacks, Koppel assured stakeholders that Monese remains on track to achieve its financial and strategic goals. He stated, “The directors expect the company will be successful in raising additional funds to implement its strategy.”
Monese, headquartered in Blackfriars, serves over two million customers worldwide, targeting migrants facing difficulties accessing traditional banks due to a lack of credit history. The last injection of funds occurred in September 2022, with HSBC providing $35 million. However, HSBC has now pivoted its strategy by launching its own money transfer app, Zing, potentially impacting Monese’s market share.
The challenging financial landscape is not unique to Monese. Numerous British tech firms, including Gousto, Graphcore, and Revolut, have seen valuations slashed as investors demand tighter cost control and clearer paths to profitability. A recent report by PitchBook indicated a rise in “down rounds,” where firms accept investment on less favorable terms than in previous funding rounds.
Venture capital firm Atomico revealed a decline of almost three percentage points in the UK’s share of European capital investment between 2021 and 2023, the steepest in Europe. The UK also witnessed the highest number of “dehorned unicorns,” referring to tech firms no longer worth $1 billion or more.
Zepz, a rival to Monese, previously laid off over a quarter of its employees to cut costs and warned about potential covenant breaches on a loan from BlackRock. Priya Oberoi, founding general partner at Goddess Gaia Ventures, emphasized the current need for proving excellence in performance, with due diligence becoming more thorough.
Industry experts and restructuring specialists caution that high-growth companies, especially in the tech sector, may face increased financial strain, contributing to an anticipated rise in corporate insolvencies in 2024. Rob Hornby, partner and managing director of AlixPartners, drew parallels to the dotcom bubble, emphasizing that consequences are imminent as previously abundant investment money begins to run dry.
As the fintech landscape undergoes a transformation, the industry’s resilience and adaptability will be crucial in navigating the challenges and securing a sustainable future for companies like Monese.
