Ten years after pitching onstage at TechCrunch Disrupt in London, fintech N26 has reported its first ever quarterly (pretax) profit. The challenger bank with millions of customers across Europe generated a net operating income of €2.8 million during the third quarter of 2024 (or $2.9 million at current exchange rates).
This is an important milestone for the startup but also significant news for the fintech industry. Challenger banks like Monzo, N26, Revolut, and Starling used to be some of the most hyped startups in Europe. They raised billions in funding, expanded aggressively, and overspent to reach that next funding round.
Now it’s time to sit down and do the math. Large funding rounds are harder to obtain and investors now often require a clear path to profitability.
Revolut is extremely profitable — $428 million in net profits for 2023 alone — while Monzo just crossed the line with a pretax profit of £15.4 million for 2023 ($19.4 million). N26 is following suit.
For several years, Germany’s financial regulator BaFin imposed a cap on new sign-ups as a sanction to force the startup to improve its anti-money laundering processes. But it lifted the cap earlier this year and that has had a significant impact on the company’s bottom line.
According to N26, more than 200,000 people currently open an account with it every month. Interestingly, N26 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 led to a 40% revenue increase for the fintech 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 as 50% of its 2024 revenue comes from interest revenues from customer deposits and the company’s retail lending activities. With interest rates going down in Europe, that source of revenue will also be more difficult to maintain at a high level.