Dive Brief:

• U.K. challenger bank Monzo submitted a de novo application for a U.S. banking charter April 20, the Office of the Comptroller of the Currency (OCC) has confirmed to Banking Dive.

• The digital bank, which says it has more than 4 million U.K. customers, plans to headquarter its U.S. operations in San Francisco, according to its 96-page application. 

• A banking license would allow Monzo to offer FDIC-insured deposit accounts without the help of a partner bank. Monzo began testing its app in the U.S. in August through a partnership with Ohio-based Sutton Bank, and is allowing new customers to join its waitlist.

Dive Insight:

Monzo has had its eyes on the U.S. market for some time. The digital bank, valued at more than $1 billion, has nearly doubled its customer base in the past year. It had 2.2 million U.K. customers in June when it first announced plans to operate in the U.S., according to The Verge.

"We are delighted to have this opportunity to apply for a national bank charter, and hope that this will allow Monzo the opportunity to bring its products and services to the U.S. market," the bank said in its application. "We believe that Monzo will be able to provide American consumers with better banking and financial products than current offerings in the U.S. market, with lower fees and charges, better customer service, and a superior digital app experience that consumers now expect."

Monzo said it plans to be profitable within three years of its U.S. launch.

In its application, the bank also addressed the potential impact of the coronavirus pandemic on the launch. 

"Whatever the level of impact, the organizers believe that Monzo has a product offering which meets fundamental needs of American consumers, and which will be attractive to customers in a range of economic conditions," Monzo said. "Furthermore, the organizers are hopeful that the majority of disruption will have passed by the time that Monzo USA is ready to launch the Bank."

The application process is expected to take 18 months to two years, according to The Telegraph.

The pandemic has forced the challenger bank to make its own adjustments in the U.K. and the U.S.

Monzo last month began accepting up to 175 furlough applications in customer support, and up to 120 from other parts of the business in the U.K. The bank’s senior management and board also volunteered to take a 25% pay cut, according to an internal memo seen by TechCrunch. Co-founder and CEO Tom Blomfield also said that he will forgo his salary for the next year.

Monzo also announced plans this month to shutter its Las Vegas office, which employs 165 customer support staff, according to TechCrunch.

With its application submission, Monzo joins U.S. challenger bank Varo Money, which is in the midst of a three-year pursuit for a banking charter, an expensive process that has already cost the digital bank $100 million, according to American Banker.

Varo, which in February received approval from the FDIC to provide deposit insurance, still needs to pass a pre-opening exam from the OCC, the regulator from which it received preliminary approval in 2018. 

Applying for a banking license isn't always a one-and-done affair. Varo withdrew its first FDIC application in 2018, after the agency asked the bank to improve its operations and fill crucial positions in senior management. The digital bank refiled its application in July.