Chinese Giant Tencent takes a stake in Monzo: Considerations, Risks & Impacts

Monzo, a popular UK-based online bank, in the latest funding round attracted one of the giant Chinese tech companies Tencent. Tencent has acquired a minority stake in Monzo. Although Monzo’s valuations dropped from £2 billion to £1.25 billion in 2019, thanks to the Abu Dhabi Growth Fund, it has received some assistance. Recently, Coatue, a New York-based investment firm, also invested in Monzo. Tencent has contributed an additional $100 million to the bank’s most recent $500 million funding round. Monzo has been doubling its revenue from last year with almost 100,000 new customers joining the online bank per month which is one of the reasons why Tencent contributed and invested in it.

After a $900 million funding round in October, Monzo is now Europe’s third most valuable neobank, behind Revolut, valued at $33 billion, and N26, valued at $9 billion.

Monzo is just another addition to Tencent’s ever-growing fintech portfolio. Several other companies, such as the Argentine personal finance app Ualá, the French startups Qonto and Lydia, and challenger banks such as Tyme in South Africa, N26 in Germany, and Nubank in Brazil, have deals with Monzo.

In light of recent national security legislation (the National Security and Investment Act), Tencent’s recent investment raises certain questions. The Act will be used whenever the government or defence assets are threatened, or if foreign powers are building defence or technical capabilities that threaten the United Kingdom. Law firms’ international clients may want to keep this in mind as the Act currently excludes technology and finance organizations.
With this Act in effect, the UK hopes to further solidify its position as a global leader in free trade and investment, while also making the country an even more attractive place to do business by providing investors with certainty and better clarity.

Interestingly, in the October of last year, over 100 MPs called for their Parliamentary Pension Fund, which holds investments in Chinese companies, including Tencent, requested that the fund withdraw its investments in Chinese corporations linked to human rights violations or institutions affiliated to the Chinese state. The ESG industry should be questioned because companies have been able to hide easily behind the vague notions of ethical investing for too long.

The United Kingdom has the potential to lead in ESG investing and has already begun to do so by setting an example. And so, no one can turn a blind eye or be ignorant to the funding of Chinese companies involved in human rights abuse & violations into the UK companies such as Monzo.

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