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Germany’s N26 becomes Europe’s top fintech with $2.7bn valuation

Digital banking

Germany’s N26 becomes Europe’s top fintech with $2.7bn valuation

Online bank raised $300m from US Insight Venture and Singapore’s GIC

Employees of the Fintech N26 (Number26), attend a meeting in Berlin, Germany, August 19, 2016. © Reuters

German digital bank N26 has become Europe’s most valuable financial technology start-up after raising $300m to fund its international expansion.

The investment values the Berlin-based online lender at $2.7bn, around three times the valuation achieved at its last fundraising less than a year ago.

Valentin Stalf, N26 chief executive, said the money would give it the “investors and financial power to really bring this company to the next stage”, including opening in the US in the first half of this year.

On top of an “aggressive” expansion in the US, via a partnership with an unnamed US bank, the company is considering further moves into several South American and Asian countries, but Mr Stalf said it would make a final decision on which markets to focus on later this year.

N26 operates in 24 European markets, including most recently the UK after a high-profile launch last October. Its 33-year-old CEO said the early response in the UK had been “tremendous”, while its overall customer base had more than tripled in 2018 to 2.3m.

It is one of a wave of new digitally-focused banks to spring up in the last few years, alongside rivals such as Monzo and Revolut in the UK.

Some observers have expressed scepticism about the new challengers’ ability to convert their large customer bases into sustainable profits. Mr Stalf said that while N26 was still lossmaking overall it was already profitable on a per customer basis, and the latest funds would be used to fund further investments and expansion rather than purely to cover losses.

“I think we have the most advanced model compared to others, we’ve not only been focused on getting users”, he added. “We could turn profitable in the next year if we wanted, but it depends on how much we want to invest in growth.”

The company, named after its original address, already offers overdrafts and consumer loans in several countries including Germany and France, with plans to roll out similar products in the UK in the coming weeks.

Mr Stalf also said about 30 per cent of UK users had signed up for the bank’s premium account, which charges a £14.90 per month subscription fee and offers a metal debit card, plus perks such as travel insurance, discounted hotel bookings and WeWork membership.

The latest fundraising was led by New York-based Insight Venture Partners and Singaporean sovereign wealth fund GIC. They join existing backers including Tencent, Allianz and Li Ka-shing’s Horizons Ventures.

Harley Miller, Insight principal, said: “N26 is the clear market leader in the European mobile banking industry, and the company is ideally positioned to expand to the US market this year, and build a formidable global digital consumer brand.”

The $300m it has raised is the biggest European fintech investment round on record, according to data from Pitchbook. The investment also makes N26 the second most valuable digital bank start-up globally, behind Brazil’s Nubank, according to CBInsights.

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