Tech Talk: Tencent (China) taking a stake in UK’s digital bank Monzo

Chinese social media company and gaming giant Tencent put a $100 million stake injection in Britain’s Monzo. Monzo is a digital bank that became successful right after launch with over 500 m active customers. After the fundraising round, the valuation of Monzo digital bank stood at over $4.5 billion.

Originally published on Sky News and later picked up by Reuters unveiled information regarding the investment as Tencent did not respond immediately for disclosure.

Tencent Holdings Ltd. ADR (TECHY) has a market value of more than £400 billion (£286 bn), of which a small stake is put into Monzo stocks. The company is one of the significant investors in US-based businesses. With Chinese regulations and crackdowns regularly, the company lost several million as adjustment price. We are not saying the focus is shifting, but diversification of company funds assorts revenue.

Tencent Holdings (0700. HK) small stake at the fundraiser will help Monzo stand up to ongoing losses. Bank auditors warned about ongoing losses for the second running year. Uncertainty is present, and Monzo let the inventors know about the detail. Still, they were interested in investing in the bank. After launching in 2015, the bank gathered five million customers with its bright coral card and data tracking on spending.

In many banks, the facility of spend tracking is not possible, or they cost a small amount, but Monzo offered a transparent balance sheet with tracing data. But it lost popularity points gradually and is taking continuous losses.

The UK based lender targeted $600 million (£444 million) fundraising according to Sky News, and many companies were instantly interested. Tencent became a prolific investor not only in the US but also in the UK. The $100 million (£75 million) investment subscription will provide Monzo with a bit more time to cope with current measures and manage customer losses.

Monzo was going through civil and criminal money laundering probe, which had its toll on the customers eventually. Though the bank offers transparent transactions, some took advantage and made it their primary gateway for exchange. Unless coming clear of the issue, the paperwork will sit on the table. The last time the bank reported on the losses was about $181.68 million (130 million pounds) for the year to February. Even last years loss was about 114 million, and the streak is pulling harmful effects for the bank.

Tencent holds stock subscriptions in major US businesses like EV company Tesla Motors, photo messaging app maker Snap, a 15 per cent stake in Glu Mobile, which now turned 21 per cent, and game development and publisher Activision Blizzard. The company currently owns 100 per cent equity of Riot Games – developer of popular game Valorant, League of Legends. Funcom, Leyou, Sharkmob, Supercell, Grinding Gear Games are also some companies that Tencent holds majority ownership of. When it comes to acquiring power and investment, Tencent comes the most prominent name from China and one of the biggest in the world.

When learning about Tencent’s Monzo bank investment on Friday, investors were curious as the pandemic seemingly gathers strong form again with the new variant and how safe the assets are. During the pandemic, many people chose a digital method of transactions, which even raised PayPal and other digital currency providers valuation on the market. Tencent made a bold move, and if it works out, there will be continuous high revenue.

Being one of the biggest Chines companies and having an extensive global fintech portfolio has given the company a notorious ability to invest and yield.

Coatue and Abu Dhabi Growth Fund also became Britain’s Manzo digital bank investors. Previously Tencent backed up Germanys N26, a European start-up and had a brief presence in the sector. But that did not last long due to Brexit-related complexities. This time with Britain’s Monzo digital banking partnership seems quite promising.