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Valentin Stalf, founder and CEO of N26, speaks on stage at the Digital Life Design Innovation Conference.
Lino Mirgeler | alliance of photos via Getty Images
The German online bank N26 said Thursday it raised a huge additional $ 170 million, valuing the start of the six-year-old fintech to $ 3.5 billion.
Based in Berlin, N26 has made waves in Europe with its application-based chequing account and debit card. The company does not operate any physical branch and has successfully attracted more than 3.5 million customers in 24 countries across the continent.
The latest capital injection comes in addition to the $ 300 million fundraising announced in January and rising to $ 2.7 billion. N26 said that existing investors, including Peter Thiel's Valar Ventures, China's tech giant Tencent and Singapore sovereign wealth fund GIC, have supported this latest round.
"I think investors around the world are seeing the disappointment felt by retail banking customers," said Valentin Stalf, CEO of N26, at CNBC. "At the same time, they see that the market is huge."
He added that the attractive value of the firm is "decent and even low" for a company of this type. "I think the company has the opportunity to earn a lot more money in the future," Stalf said. In comparison, the British competitor Monzo was recently valued at $ 2.5 billion by investors during his last round of financing.
This new money will help N26 increase its recruitments and fuel its global expansion strategy. The company currently has 1,300 employees worldwide. Recently launched in the United States, the German fintech company now has its eyes turned to Brazil and is expected to launch their next year.
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Stalf has described Brazil as "one of the most attractive retail banking markets" and "the most confusing". He will find a direct competitor in the Latin American mobile lender Nubank.
The investment will also be used to fund N26's product development, as the company plans to rethink its application and propose new features to boost engagement and gain more customers from established banks. A feature under development is a tool called "shared spaces", which will allow users to create sub-accounts that can be shared with friends.
Think of it as "sharing an account with friends, like a WhatsApp group," Stalf said, letting them split bills or organize vacations. N26 will also introduce a schedule for expense history, add the ability to connect multiple cards to the application and use artificial intelligence to highlight irregular and potentially fraudulent transactions, said the company's boss. .
The new investment brings the total funding of N26 to more than $ 670 million. It follows a series of high-profile deals this year in Europe's rapidly growing financial technology sector. According to CB Insights, venture capitalists have injected $ 1.7 billion into the fintech industry on the continent in the first quarter of 2019 alone.
But if the so-called NeoBanks such as N26 have attracted millions of customers and a lot of investment, they have struggled to translate their explosive growth into profits. Although it is not yet a profitable business, N26 claims to have seen an improvement in margins per customer.
"Most neo-banks are not yet profitable because they are growing rapidly and are new businesses," said Andrew McCormack, partner of Valar Ventures. "N26 has very strong contribution margins on every customer, which improve quickly – that's why investors are so eager to invest."
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