Monzo, one of Britain’s first digital banks, has closed a $500m round at an increased valuation of $4.5bn, the company has confirmed.

It will be a sigh of relief for the fintech, which suffered a series of setbacks in 2020 — including having its valuation slashed, struggling to break into the US and suffering heavy financial losses.

The raise included new investors like the Abu Dhabi Growth Fund, Coatue and Alpha Wave Ventures. The new funds will go towards supporting building out new products, including a trading platform — and covering its burn rate.

Monzo’s continued growth through Covid proved critical in wooing investors, the company told the Financial Times. Last year, Monzo secured 1m new customers and an 18% jump in revenues. This was aided by a new subscription line and the launch of its business line.

At $4.5bn, Monzo is now Europe’s third most valuable neobank, behind Revolut and N26. It’s a 200% hike on its 2020 valuation and a 182% improvement from its 2018 pre-money valuation.

• How does Monzo stack up against its UK rivals?

However, Monzo’s new price tag is a far cry from the eye-watering valuations being hauled at other fintechs, prompting Monzo to slip down the rankings in Europe, which is now home to ~40 fintech unicorns.

Investors will note the fact that Monzo is one of the last UK neobanks to reach break-even, flagging that there was “material uncertainty” about its future in its latest accounts. The fintech also revealed that it is under investigation by regulators for its money-laundering measures after failing to catch nearly £10m in customer fraud.

Still, Monzo has outlived the likes of Tandem — which was effectively taken over by a private equity firm last year — and has grown faster than Lunar in the Nordics or Bunq in Holland.

Monzo is now focused on growing its userbase, lending and boosting revenues. It’s putting its hopes in Monzo Flex, its new buy now, pay later feature which enables customers to split card payments into instalments, taking on the likes of Klarna.

Monzo executives also told Sifted earlier this year they expect to see the company go public soon.

Founded in 2015, Monzo today boasts over 5m UK customers, with an average deposit per user at £620 in February this year. Monzo also has the largest market share among UK digital banking users, with 39%.

The latest raise takes Monzo’s total funding to over £900m.

Some of its biggest backers include Passion Capital, which now owns just under 25% of the bank. Investors who joined Monzo in its previous round will have benefited most from the new valuation. These include Octahedron Capital, Kaiser Permanente Ventures, and Vanderbilt University.