HSBC has conceded a significant loss by writing off its investment in British fintech Monese, a company previously touted as a potential "unicorn". Just two years after pouring $35m into the Revolut competitor, HSBC's remaining $5.86m stake has been declared "completely impaired" as of March and April, as revealed in documents from HSBC's investment division.
The multinational bank attained a minority stake in Monese back in 2022, which was linked to a strategic collaboration centred on Monese's banking-as-a-service (BaaS) technology, as reported by City AM.
Currently undergoing corporate restructuring, Monese signalled troubles earlier this year when it expressed concerns over its viability due to difficulties in securing additional capital. Its BaaS operations have since evolved into an independent entity named XYB, with reports suggesting that Monese's consumer banking section is poised for acquisition by Pockit, another UK fintech aiming to serve financially marginalized customers.
HSBC, which has declined to comment on the financial hit, held a 5.4 per cent share in Monese according to company records.
Similarly silent, Monese itself hasn't provided any statements regarding the situation.
This development follows the lead of one of Monese's primary investors, Kinnevik of Sweden, which also discounted its own investment in the fintech last year. Despite acknowledging the intrinsic worth within Monese, Kinnevik pointed to an unpredictable future for the firm.
Additional support for Monese had come from several high-profile companies, including PayPal, Augmentum Fintech, and International Consolidated Airlines Group.
As fintech continues to burgeon, global banks have been proactively engaging with the sector, either through direct investments or by developing their own fintech offerings, in a bid to tap into the lucrative market and stave off competition.
HSBC has entered the competitive fray with Wise and Revolut by launching Zing, its own international payments app, this January. Yet, HSBC's venture with Monese serves as a cautionary tale of the perils within the fintech sector.
The industry has witnessed notable failures, such as Barclays' PingIt, Santander's Asto aimed at SMEs, and RBS' digital bank Bo. Launched in 2019 to take on Revolut and Monzo, Bo was discontinued after a mere five months.
Monese, established in 2015, had the distinction of being the UK's inaugural mobile-only app-based bank but was quickly eclipsed by competitors like Revolut, Monzo, and Starling.
According to the most recent financial statements, Monese's pretax losses expanded from £18.7 million in 2021 to £30.5 million in 2022. Despite a revenue increase of 58% to £27.7 million, rising administrative costs to £31.3 million from £18.5 million dampened the growth.
In 2020, it was revealed that Monese was engaged in discussions to secure £100 million in funding, a move that could have propelled it to "unicorn" status with a valuation exceeding £1 billion.