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UK neobank Monzo has filed an application with the US Office of the Comptroller of the Currency to obtain a US banking license, The Telegraph reports.

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It is expected that the neobank's application could take between 18 months and 2 years to secure approval, but if it succeeds, Monzo will be able to offer FDIC-insured deposit accounts and lend money to US consumers without needing a partner bank. In addition to applying for this license, the neobank is planning to grow its headcount in the US and open a new office in San Francisco to facilitate its expansion.

Acting as an independent bank would carry several distinct advantages for Monzo if its application succeeds. Expanding into the US provides a major revenue opportunity for Monzo because it grants access to a huge new banking services market in which card fees can run around $1.50 per every $100 spent, as opposed to just 20p (25¢) per £100 ($123) spent in the UK, per The Telegraph.

That opportunity, however, will be even more significant if Monzo can become its own licensed bank, as it won't have to concern itself with sharing any of the revenue it makes in the US with a partner bank that holds its deposits. In a similar vein, it also won't have to undergo the overhead investment of time and money that an IT integration with a partner bank would represent.

But the timing of Monzo's application is very ambitious, and time will tell if that will help or hurt its effort to establish a foothold in the US. It's bold of Monzo to be starting the arduous task of applying for a US banking license before it has even conducted a full rollout of its services to US consumers to gauge demand — while it has been operating a limited test of its app in partnership with Ohio-based Sutton Bank, the Monzo US website still only invites prospective customers to join the waitlist.

Additionally, the ongoing coronavirus pandemic and resulting economic uncertainty is demanding the attention of federal banking regulators like the FDIC and the Department of the Treasury, which will likely add to Monzo's processing time. And the pandemic has short-staffed Monzo too: The neobank will furlough up to 295 employees in the UK and is closing a customer support office in Las Vegas, which calls into question the viability of opening a San Francisco office.

But if Monzo is successful in obtaining a license by the end of next year despite these impediments, it would be miles ahead of other European neobanks seeking to build out their businesses in the US and would even have an edge on native neobanks like Chime, which doesn't have its own banking license.

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