Monzo, the digital bank founded in the U.K. in 2015, is rolling out to American customers after signing up 2 million users in its home country.
Monzo is a bank without branches. Customers manage their money using an app paired with a Mastercard debit card.
In addition to serving as a bank account (insured by the Federal Deposit Insurance Corp.), the app offers tools for splitting bills, transfering money and budgeting.
"With Monzo, we aim to make money work for everyone by working with our community of users to build things that work for them," said Monzo CEO Tom Blomfield in a statement.
Blomfield believes Monzo can out-innovate traditional banks.
"When it comes to consumer apps, banks are at least a decade behind the ease and feature-set of a Lyft or an Airbnb, not to mention sloth-like and unimaginative when compared to the innovation cycle in the apps we use every day," Blomfield said.
Monzo aims to be more than just a place customers keep their money, he said. While entering the U.S. market will be an uphill battle, Monzo has some opportunities to succeed, said Jim Miller, vice president of the banking and credit practice at J.D. Power, a market research company.
The U.S. banking market is large, so Monzo can succeed even if it draws only a small share of customers away from existing banks. Monzo can also take advantage of the financial industry's reputation, which has yet to recover from the Great Recession, Miller said.
"This creates an opportunity for an alternative that consumers feel is more focused on doing what is right for the customer rather than for the bank's bottom line," he said.
Monzo has a blueprint for disrupting the financial industry in Venmo. Like the popular payment app, Monzo should aim to gain acceptance from younger people through the social features of its platform, like splitting bills and paying friends over Bluetooth, Miller said.
Monzo's money management tools could fill a need among younger consumers and help keep the company ahead of bigger banks, though not for long, Miller said. The big banks have enough resources to duplicate Monzo's most successful features.
Monzo could have trouble convincing customers to switch banks, Miller said. Only 4% of customers switched banks over the past year, according to J.D. Power research.
For 18- to 24-year-olds, that number rises to 10%, still a relatively small pool for a new bank to draw on, Miller said. A lack of brick-and-mortar branches could also hurt Monzo.
"Online banks have shown strong growth in the U.S., but most consumers still want ... a traditional bank with branches," Miller said. (Learn the pros and cons of online banks.)
While Monzo has gained users fast in the U.K., the landscape in the U.S. is more competitive.
"The major banks in the U.S. have robust digital offerings including apps with a wide set of features," Miller said.
Monzo must also compete with well-established online banks like Discover, Capital One and Ally, which have a head start in market awareness, he said.
Monzo has a wait list for U.S. customers interested in checking it out. If you're curious about it, you can sign up on the Monzo USA website.
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