Challenger Bank N26, based out of Germany, has announced that it has raised $900 million in its Series E funding which now values the company at $9 billion which is roughly equal to that of the second-largest bank in Germany which is Commerzbank.
The bank was launched in 2015 as a simple provider of a current account with a card tagged to it but has since grown into a large bank offering a range of products and with over 7 million customers across 25 countries. The latest round of funding was led by Third Point Ventures and Coatue Management and was joined by the existing investors as well. The growth of neobanking over the last couple of years, with the big shift towards digital banking and the need to reduce costs for traditional banks, has combined to give a boost to N26. Neobanking helps to cut down the number of branches that a bank has to maintain as every process is handled online and on mobile apps. Users can sign up and verify themselves using the app and then they would be able to get an account along with a virtual card which they can then tag to Apply Pay or Google Pay and start to spend, make deposits and do withdrawals as well.
Valentin Stalf, CEO, N26, said: “This recent financing round solidifies the fact that retail banking as we know it has changed. With our fresh capital, we are in prime position to become one of the biggest retail banks in Europe, all without a single branch.”
So far, the bank has focussed on its core market which is Europe and the bank continues to believe that it has a large room for expansion in the region, and for now, it does not have any plans to expand into other countries. They believe that the penetration is still less than 10% which means that the growth potential continues to be huge in the region. It is likely to face a lot of competition from the likes of Revolut and that’s why it seems to want to focus on Central Europe at this point in time. For this, the regulators would also need to cooperate to give the bank the freedom to carry out its upgrades and innovations in the coming months which would help with its expansion, a challenge quite similar to those faced by other companies.