Ten years later pitch on stage at TechCrunch Disrupt in London, fintech N26 reported its very first quarterly profit (before taxes). The challenger bank with millions of customers across Europe generated a net operating profit of €2.8 million during the third quarter of 2024 (or $2.9 million at current exchange rates).
This is an important step for the startup but also important news for the fintech industry. Challenger banks like Monzo, N26, Revolut and Starling were once among the hottest startups in Europe. They raised billion in financing, extended aggressively and too much spent to reach the next funding cycle.
Now it’s time to sit down and do the math. Large fundraising rounds are harder to come by and investors now often demand a clear path to profitability.
Revolution is extremely profitable – $428 million in net profits in 2023 alone – while Monzo I just crossed the line with a pre-tax profit of £15.4 million for 2023 ($19.4 million). N26 follows suit.
For several years, German financial regulator BaFin has imposed a cap on new registrations as a sanction to force the startup to improve its anti-money laundering processes. But that survey the cap earlier this year, which had a significant impact on the company’s results.
According to N26, more than 200,000 people currently open an account there each month. Interestingly, N26 has stopped sharing the total number of users it has. Instead, the company focuses on its 4.8 million “revenue relevant” customers.
The influx of new users has caused the fintech’s revenue to increase by 40% in 2024 compared to 2023. And N26 is on track to generate €440 million in annual revenue this year.
As a reminder, in addition to free accounts, N26 offers paid subscriptions with access to more financial services and features. The company also offers savings accounts, stock and crypto trading as well as credit products.
Now let’s see if N26 manages to stay in the black since 50% of its revenue for 2024 comes from interest income from customer deposits and the company’s personal lending business. With interest rates falling in Europe, this source of income will also be more difficult to maintain at a high level.