Monzo USA has withdrawn its application for a national bank charter. In May 2019, the National Community Reinvestment Coalition (NCRC) filed a comment opposing the application and noted then that the company had not provided a complete plan to meet its community reinvestment obligations.
Monzo intended to bring the online banking model it established in the United Kingdom to US consumers. It would have taken deposits and offered unsecured credit throughout the nation, but intended to limit its community reinvestment efforts to San Francisco, Berkeley, and Oakland. Monzo failed to illustrate how it would meet the credit and banking needs across its full footprint.
The application lacked important details, including the absence of a plan to provide underserved consumers with retail loans. Moreover, although Monzo planned to offer retail products, the scope of its Community Reinvestment Act (CRA) plan was limited to community development lending and services. Monzo did not promise specific activities and didn’t provide quantitative benchmarks for evaluating its performance. In each of the three aspects of its proposed CRA plan, Monzo couched its intentions in vague and non-committal terms: “The Bank may engage in community development lending, the Bank is likely to make qualified investments, and the Bank is likely to engage in community development services.”
“Bankers understand numbers and expectations to meet specific goals, and those expectations are institutionalized at every level of performance measurement,” said Jesse Van Tol, President and CEO of NCRC. “In this case, Monzo’s leadership chose to not attach numbers to its aims, leaving themselves unaccountable. The application was flawed and we’re relieved it was withdrawn. Receiving a bank charter is a privilege, not a right.
“Given the OCC’s proposal to rescind its 2020 CRA final rule and set new rules jointly with the FDIC and Federal Reserve Board, it would make sense if the agency decided to hold off on approving new charter applications from digital fintechs until a new interagency rulemaking process is completed. We know that the current approach, where existing all-digital banks can do business nationally but only have an assessment area in a single MSA, limits their accountability for meeting the needs of low and moderate-income households.
“Instead of assuming that digitization of financial services will automatically expand access to banking, CRA exams should scrutinize whether a financial institution can use online channels to effectively deliver their products to lower-income communities and people of color. Reviews should also explore how those services will reach consumers in rural areas, as well as for underbanked and under-phoned households.”
