Britain’s hottest banking app is coming to the United States.
Monzo, known across the United Kingdom for its signature bright coral cards, said Thursday that it’s planning launch events in Los Angeles and other major US cities.
The move is a big gamble for the startup, which has gained massive popularity due to its easy-to-use interface and appeal among young professionals.
“It’s attracting customers who initially buy into the hype, and [then] realize it’s a better banking experience,” said Alessandro Hatami, managing partner at Pacemakers, a digital banking consultancy.
That doesn’t mean the United States is a sure bet.
Navigating fintech regulation is much harder in America than in much of Europe, since companies have to gain approvals state by state. Plus, there’s already plenty of competition for deposits, from traditional banks to tech companies such as Paypal (PYPL).
Monzo, which was founded in 2015, has more than 2 million users in the United Kingdom. It says it’s adding 200,000 more each month.
The company is valued at nearly $1.3 billion, according to CB Insights. It has some support in the United States; Joshua Kushner’s Thrive Capital is an investor.
The app has been able to build a fan base because it’s fast and intuitive, Hatami said. Instant spending notifications and no fees on international payments have served as a major draw.
Those features will also be available in the United States, according to a spokesperson, though the company said will take time to build out a full suite of offerings.
Monzo still has room to grow in the United Kingdom, according to John Cronin, financial services analyst at Goodbody. But it makes sense for the bank to see if its model can work in the United States, which is an extremely fragmented market without a dominant player, he said.
Among the biggest challenges for Monzo will be differences in regulation. UK regulators are known for being friendly to fintech companies. The environment looks different in the United States.
“US regulators are not that savvy as far as financial services are concerned,” Hatami said. “They’ve either been oblivious on regulation, or incredibly strict.”
Monzo was able to obtain a banking license in the United Kingdom in April 2017, which allowed users to perform bank transfers and set up services such as direct debits and deposits.
It won’t enter the US market with such a permit. Instead, the company is partnering with the Ohio-based Sutton Bank, which overseen by the Federal Deposit Insurance Corporation.
The United States is also home to different spending and saving trends. What tends to attract attention is credit cards that come with lots of reward points. And mobile payments are not yet ubiquitous in America the way they are in parts of Europe.
Hatami said that he thinks Monzo will be adaptable and could even adopt a points scheme down the line.
“They’re very good at understanding what you actually want to do with your money,” he said.
The startup will have no shortage of competition. It will come up against Venmo owner Paypal, other startups like SoFi and traditional banks such as JPMorgan Chase (JPM), which have been pouring money into their digital offerings.
Then there’s the threat of Silicon Valley getting into the payments space. The real danger for Monzo is that Facebook (FB) or Amazon (AMZN) will get involved in online banking or payments in a big way, Cronin said.