The price of money: how Nubank could acquire Monzo

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It has been reported this week that Nu Holdings, the parent of Nubank, is in early talks to buy Monzo at a value of £8-10 billion. Monzo has hired advisers and is weighing the approach against a new funding round above £8 billion as it continues to expand across Europe. Nothing is yet confirmed, with both banks refraining from commenting so far. 

Nubank's shareholders did react, however. They sold the stock down 10% to $12.23 on Monday, and indicated an unwillingness to see the potential value of the deal.

It is tempting to tell this as a tale of two start-ups, one of which simply ran faster. But that misreads it. Nubank and Monzo raised similar amounts of outside capital, roughly $2.3 billion and $1.8 billion respectively, and were founded within two years of each other. What separated them was not talent or timing. It was the economics of the countries they were born into: what money cost, what regulators allowed, and what capital markets were prepared to pay for the result. 

In this week’s episode we take a look at what’s led to this moment and what this means for Monzo shareholders.

Brazil: a market that overcharged its customers

Nubank was founded in São Paulo in 2013 by David Vélez, Cristina Junqueira and Edward Wible, into a banking system in which five institutions controlled around 80% of financial products. Concentration of that kind has predictable consequences. Brazilian consumers paid some of the highest fees and credit-card interest rates in the world and had few alternatives.

The opening was regulatory as much as technological. Months after Nubank's founding, a new payments law brought payment institutions under central bank supervision and gave non-banks a legal route into card issuing. Nubank took it with a no-fee credit card, the product incumbents had most to lose from undercutting. The Banco Central do Brasil then kept going: Pix, its instant payments system, launched in 2020 and open finance followed. Nubank was, in effect, the policy working.

The second condition was the price of money. Brazil runs one of the highest real interest rates of any large economy. That is a burden for borrowers and a gift to a lender with low costs and good data. Nubank's net interest margin, what it earns on lending after funding costs, was 22.9% in the June quarter, with operating costs just 19.5% of revenue. Management says it has deliberately expanded its appetite for risk, and cost of credit was $1.7 billion in the quarter. 

Nubank has 139 million customers, but almost 118 million of them are in Brazil, and its quarterly profit is about nine times Monzo's pre-tax profit for an entire year.

Britain: a market that paid nothing for deposits

Monzo was born into almost the mirror image. After 2008, British regulators concluded that the big high-street banks faced too little competition and set about lowering the drawbridge. From 2013 the new Prudential Regulation Authority cut capital requirements for new entrants and later created a 'mobilisation' route that let a start-up operate with restrictions while it built towards a full licence. The Competition and Markets Authority's retail banking inquiry produced Open Banking. Starling, Atom and Monzo were products of that policy.

Tom Blomfield founded Monzo, then Mondo, in February 2015. Its coral card, its crowdfunding rounds (£1 million raised on Crowdcube in 96 seconds in 2016) and its word-of-mouth growth made it the most recognisable consumer brand in British fintech. It won a full banking licence in 2017. It did not, however, have a business model that worked in the conditions of the time.

The problem was the price of money, again, in reverse. For most of Monzo's first decade, the Bank Rate sat close to zero, touching 0.1% in 2020. A current-account bank earns its living by lending out deposits or placing them at the central bank. When rates are at the floor, a large deposit base earns almost nothing. Interchange, the fee a card issuer earns on each transaction, offered no substitute: European rules, retained after Brexit, cap it at 0.2% on consumer debit cards. Brazil imposes no equivalent cap on credit cards, Nubank's core product. The same customer behaviour, tapping a card, paid a Brazilian issuer many times what it paid a British one.

So Monzo grew customers while losing money, and when the pandemic hit it paid the price: a 2020 funding round that cut its valuation by 40%, and a change of CEO from Blomfield to TS Anil. In 2021 it withdrew its application for a US banking licence after being told approval was unlikely.

Then the regime changed. From December 2021 the Bank of England raised rates fourteen times in a row, to 5.25% by August 2023. British current accounts still pay little or nothing on most balances, and overnight Monzo's deposits became what a bank's deposits are meant to be: cheap funding that earns a spread. Monzo reported its first annual profit in the year to March 2024. Its latest accounts, to March 2026, show 15.2 million customers, £1.7 billion of revenue (up 39%), £25.7 billion of deposits (up 55%) and statutory pre-tax profit of £87.3 million. Monzo did not change its model, it finally started to benefit from monetary policy changed the value of the model it already had.

Capital markets decided who buys whom

Nubank listed on the New York Stock Exchange in December 2021, at almost the exact peak of the growth-stock boom, at a value of $41.5 billion. By May 2022 its shares were 64% below their $9 offer price. As profits compounded, the market re-rated the stock, which peaked at $18.98 in January 2026. Even after this week's fall, Nubank is worth about $59 billion.

That share price is the currency of any deal, which Sky reports would be paid in cash and stock. At the end of 2022, £8-10 billion would have been 56-70% of Nubank's market value, and a share-funded deal would have been closer to a traditional merger rather than an acquisition. 

Monzo, meanwhile, staying private, as British companies increasingly do. Its valuation rose from the 2020 low to about £4.5 billion in 2024, where it stalled, and a London listing at around £6 billion was being discussed as recently as May 2025. The CEO who had been pushing for one, Anil, stepped down in October 2025, reportedly after disagreement over timing, and Diana Layfield took over in February. The Chair has since left too. A company in the middle of a leadership transition, with investors who have waited two years for a liquidity moment, is naturally going to see some shareholders look at all their options, and Nubank is offering an enticing exit.

What Nubank would actually be buying

Nubank's strategic problem is geography. Almost 85% of its customers are in one country, and 118 million customers in a nation of roughly 210 million leaves less room to grow than it once did. Its answer has been to replicate: $4.2 billion committed to Mexico, where it began operating as a bank in August and a conditional US national bank charter granted in January. Its largest known acquisition, the Easynvest brokerage, cost a reported $70 million. Monzo would be 150 to 190 times that size.

Monzo offers three things Nubank cannot easily build. A UK banking licence. A full EU licence, granted through Ireland. And, most valuable, a deposit base whose cost reflects British rather than Brazilian conditions. Monzo holds about £1,690 of deposits per customer, against just £245 at Nubank, whose Brazilian accounts pay interest tied to the policy rate. One analyst at Forbes calculates that £10 billion would be 58 times Monzo's adjusted pre-tax profit. 

It would also put Nubank head to head with Revolut, reported to have 80 million users, on Revolut's home turf. Monzo's CFO, Tom Oldham, used to run financial planning at Nubank, so the buyer would not be arriving as a stranger either.

Can Nubank afford it?

Just about, which is why its shareholders are nervous. £8-10 billion is 0.9 to 1.2 times Nubank's book equity of £8.5 billion, so it cannot be paid in cash without heavy borrowing or a large raise. It is roughly three years of profit at the current run rate, which is manageable, but only if Nubank's shareholders are willing to share the enlarged company. Paid entirely in stock at today's price, Monzo's holders would own 15-18% of the combined group. The market's reaction this week has, in other words, already made the deal more expensive.

Regulation adds time and risk. Any change of control would need PRA and FCA approval, which can take up to 60 working days from a complete notification, and for a bank holding £25.7 billion of retail deposits the regulators would likely take their time to scrutinise this deal closely.

Who gets paid

Monzo's cap table is not public, but the broad shape is clear. With about £1.4 billion raised against a price of £8 billion or more, liquidation preferences are unlikely to bite. Early backers such as Passion Capital, and the thousands of crowdfunders who bought in when the coral card was a novelty, would earn exceptional multiples; one analyst's estimates put Passion's seed return near 200 times. Investors from 2021 onwards would make two to three times their money. Employees who sold in the October 2024 secondary at £4.5 billion have already been paid, at half the price now being discussed.

The form of payment matters as much as the price. Sellers offered Nubank stock are being offered equity that fell 10% on the news alone. Monzo’s Board and shareholders will be reviewing their options. It could pursue another funding round above £8 billion or pursue a minority sale to private equity group Advent.

What it means for London

A sale would rule out a near-term London listing and would add one of Britain's best-known digital banks to the long list of domestic technology champions acquired rather than floated. Revolut, recently valued at $115 billion, said this month that it is weighing a dual listing in New York and London, with New York the larger draw. It reflects where growth capital is priced, and London is not, for now, that place.

Britain's regulators did what they set out to do after 2008: they created challengers that took customers from incumbents. What didn’t develop however was a domestic capital market willing to value those challengers highly enough to keep them independent. Naturally shareholders want to see the greatest return on their equity, and that typically means going to the capital markets where they’re priced higher too. It’s the same reason Nubank listed in New York too. 

The Unsophisticated Investor take

The mechanism is simple. Nubank's capacity to bid is a function of its own share price, and the ceiling on any offer is the most it can defend to shareholders who marked the stock down 10% on the rumour alone. The floor is Monzo's own funding round, or a potential minority sale to private equity investors. It will also be interesting to see how regulators and policymakers in the UK react to the potential sale of one of its most prized FinTechs.  

The test is largely timing. Nu reports third-quarter results in November and holds its first investor day in early December. If Nubank has neither signed nor walked away by then, we would read that as a win for Monzo's funding round, and for the argument supporting the position of Britain's challenger banks able to continue on their own.

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The Unsophisticated Investor is brought to you by Mark, Head of UK Expansion & Operations at Shuttle. Shuttle's mission is to break down the barriers to private markets and make wealth-building opportunities accessible beyond the ultra-wealthy elite. To do it, we're building Europe's private market infrastructure platform for running investment operations. By stripping away the legal friction and admin for deal managers, we make it easier than ever for high-performing opportunities to open up to a wider, modern network of investors.

Mark
Shuttle’s Head of UK Expansion & Operations