Coronavirus: Digital bank Monzo cuts 120 staff

Digital challenger Monzo has announced 120 job cuts as it navigates the current economic slowdown

Digital challenger bank Monzo has announced that it will cut 120 jobs as the continued disruption caused by the Covid-19 takes its toll.

This comes two weeks after the bank announced plans to raise £80m to help it through the current slowdown.

As reported by Reuters, an internal memo to staff said: “Unfortunately we haven’t been able to achieve the goal of preventing the risk of redundancy at this time. It’s genuinely heartbreaking to share the news.”

Monzo is a mobile-only bank that received its banking licence in April 2017. It has amassed about one million customers and is creating jobs, including plans last year to create 300 jobs in Cardiff over the next few years.

Before making announcing the redundancies Monzo’s CEO Tom Blomfield had already announced he would not take a salary for the next 12 months. It also furloughed some employees and closed a customer service office in Las Vegas.

Monzo is not the only fintech to be hit by the slowdown. Peer-to-peer lender LendingClub, which was an early market entry after being launched in the US in 2007, recently announced it was laying off 400 staff as demand for its lending service falls during the Covid-19 crisis. It also announced temporary 25% pay cuts for senior executives, with the salary of its CEO cut by 30%.

Monzo and LendingClub are well established with a large customer base, so will still attract investment, albeit with a reduced valuation, but less prominent fintechs face extreme uncertainty.

Read more about fintech amid Covid-19

Much of the uncertainty stems from the drying up of investment capital from the likes of venture capitalists. Fintechs amass high costs early on so if a downturn hits before they have built up large customer bases they face major challenges to survive.

Analyst firm Forrester recently said the current crisis will be no different from previous economic downturns in making investment funds – the lifeblood of fintechs – scarce.

“The last two economic downturns saw a huge reduction in private financing,” said Forrester in a recent report. “This time won’t be different. Only fintechs that had market traction, were profitable or had secured a big funding round before Covid-19 struck will survive the upcoming consolidation.”

According to fintech entrepreneur Matthias Kroener, who set up and later sold Fidor, one of the earliest digital challenger banks, these are extremely stressful times for fintechs. But he added that many are driven by the thought that there will be a huge opportunity when the crisis is over. “It is an evolutionary moment and is accelerating the fintech industry, which could see companies move into new business lines,” he said.

“Covid-19 could accelerate the arrival of the next iteration of the fintech industry,” said Kroener.

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