D.E. Shaw is in discussions to lead a funding round of at least £300m for UK digital bank Monzo, in a transaction that could value the fintech at approximately £7bn and strengthen its position ahead of further expansion.

The proposed investment, which could reach between £300m and £500m, would represent a significant step up from Monzo's last reported valuation of £4.5bn in an October 2024 secondary share sale. The terms have not been finalised, and other investors are also understood to be in discussions with the company.

The talks follow the collapse of discussions over a potential takeover by Brazil's Nu Holdings, which had considered a valuation of between £8bn and £10bn. Separate negotiations with private equity investors, including Advent International, TPG and CVC, also failed to produce an agreement.

The proposed D.E. Shaw investment would instead provide Monzo with fresh capital through a more conventional fundraising, allowing the digital bank to continue developing its business while retaining its independence.

Monzo has expanded rapidly in recent years and now serves approximately 15m to 16m customers. For the financial year ended March 2026, it reported revenue of £1.7bn, an increase of 39%, while adjusted profit before tax rose 20% to £172.6m. Customer deposits reached £25.7bn.

The company's growth has helped establish it as one of Britain's most prominent digital banking businesses, with an expanding range of current accounts, savings products, lending and business banking services.

D.E. Shaw's potential involvement would bring a major US investment manager into the company's shareholder base. The firm manages approximately $125bn and has invested in technology businesses, including artificial intelligence company Anthropic.

A transaction at the proposed valuation would provide Monzo with additional resources to pursue product development and international growth, while potentially strengthening its position ahead of a future public listing.

The discussions also follow renewed interest in the prospects for UK fintech listings, with policymakers and the London Stock Exchange seeking to encourage high-growth companies to choose London as a flotation venue.

However, the proposed fundraising remains at an early stage, and neither Monzo nor D.E. Shaw has confirmed that an agreement has been reached. The final valuation, size of the investment and participation of other investors remain subject to negotiation.

For D.E. Shaw, an investment would provide exposure to a scaled digital banking platform at a time when established financial institutions face increasing competition from technology-led challengers. For Monzo, the potential capital raise would offer an alternative to a sale while supporting its next phase of growth.