A decade after making its pitch on stage at TechCrunch Disrupt in London, fintech N26 has reported its first-ever quarterly (pre-tax) profit. The challenger bank, which has millions of customers across Europe, generated a net operating profit of €2.8 million in the third quarter of 2024 ($2.9 million at current exchange rates).
This is not only an important milestone for startups, but also important news for the fintech industry. Challenger banks such as Monzo, N26, Revolut and Starling were once some of the hottest startups in Europe. They raised billions of dollars, expanded aggressively, and overspent to reach the next round of funding.
So sit back and do the math. Large funding rounds have become harder to obtain, and investors are increasingly looking for a clear path to profitability.
Revolut is highly profitable, with net profits of $428 million in 2023 alone, while Monzo just crossed the line with pre-tax profits of £15.4 million ($19.4 million) in 2023. N26 is also following suit.
For years, German financial regulator BaFin has imposed caps on new registrations as a sanction to force startups to improve their anti-money laundering processes. However, that cap was lifted earlier this year, significantly impacting the company's revenue.
According to N26, more than 200,000 people currently open accounts every month. Interestingly, N26 has stopped sharing the total number of users it has. Instead, the company is focusing on its 4.8 million “revenue-related” customers.
The influx of new users led to a 40% increase in fintech revenue in 2024 compared to 2023. N26 is also expected to generate annual revenue of 440 million euros this year.
In addition to free accounts, N26 also offers paid subscriptions that give you access to more financial services and features. The company not only offers credit products, but also savings accounts, stocks, and cryptocurrency trading.
Next, let's see if N26 can remain profitable in 2024 as 50% of its revenue comes from customer deposits and interest income from the company's personal lending activities. As European interest rates fall, it will also become harder to maintain that revenue stream at a high level.