New digital banks turn to celebrities to boost sales

Two of the UK’s new digital banks are bringing on board celebrities and raising millions of pounds from investors in an attempt to boost scale and appeal to millennial customers.

Monzo, an app-based bank that gained its licence from financial regulators last year, has raised £19.5m from a group of investors, paving the way for the launch of its current account in the summer.

The mobile-focused bank is also set to raise money from angel investors in the next few months, which could include British singer Tom Odell, who is also a customer of Monzo, according to a banker close to the plan.

Another app-based lender, Atom, which launched last year, is finalising a capital raising of about £100m from existing investors — and has signed a deal with record producer and singer Will.i.am to act as an adviser and to potentially take a stake in the business, said one person involved in the plan.

Atom’s largest shareholders are Spanish bank BBVA, Toscafund and UK fund manager Neil Woodford.

Monzo and Atom are among a new breed of app-based banks that are focused on customers who want to manage their finances via their mobile. Consultancy firm CACI forecasts that the number of branch visits will almost halve over the next four years, as more people turn to mobile.

Unlike traditional banks, a number of these new digital lenders aim to help customers save money, in part by working with retailers and other companies to offer discounts or cheaper energy bills.

But the chief executive of one start-up said funding was increasingly tough to obtain, as more new banks emerge, making it tough for some to launch and achieve scale.

As well as raising money from institutional investors — including US investment company Thrive Capital, Passion Capital and Orange Digital Ventures — Monzo is targeting £2.5m in crowdfunding from its customers. The bank raised £1m through crowdfunding in 96 seconds last year.

Tom Blomfield, chief executive of Monzo, expected that 4,000-5,000 people would be able to invest in the latest crowdfunding round.

He is aiming to turn Monzo into the main port of call for customers to manage their money. It will initially launch a current account, and will then connect with a range of companies, such as other banks, so that customers can change their energy bills or obtain a mortgage through the app.

“A customer might have 10-15 financial services providers, and wants to control them through one interface — Monzo is building that interface,” Mr Blomfield said.

Atom declined to comment. Will.i.am and Mr Odell could not be reached for comment.