Valentin Stalf, founder and CEO of N26, speaks on stage at the Digital Life Design Innovation Conference.
Lino Mirgeler | picture alliance via Getty Images
German online bank N26 announced on Thursday that it has raised $ 170 million in additional funds, bringing the six-year fintech start-up worth $ 3.5 billion earned.
N26 based in Berlin has generated revenue waves in Europe with its app-based checking account and debit card. The company does not operate in-store operations and has managed to attract more than 3.5 million customers in 24 countries across the continent.
The latest capital injection is an increase in the company's $ 300 million donations announced in January, which saw it worth $ 2.7 billion. N26 said existing investors, including Peter Thiel's Valar Ventures, Chinese technology giant Tencent, and Singaporean sovereign wealth fund GIC, supported this latest round.
"I think investors around the world are seeing customer frustration in retail banking," said Valentin Stalf, CEO of N26, to CNBC in an interview. "At the same time, they see it's a huge market."
He added that the company valuation for a company of this type is "decent and actually low". "I think the company has the opportunity to be worth more in the future," said Stalf. By comparison, British rival Monzo was recently rated $ 2.5 billion by investors in its most recent round of financing.
The fresh money will help N26 recruit new employees and drive its global expansion strategy. The company currently employs 1
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Stalf described Brazil as "one of the most attractive" and "most confusing" retail markets. There, the Latin American mobile operator Nubank will find a direct competitor.
The investment will also fund N26's product development as the company seeks to revise its app and introduce new features to further its engagement and attract more customers from established banks. A feature in the pipeline is a tool called "Shared Spaces" that allows users to create subaccounts that can be shared with friends.
Imagine sharing an account with friends like a WhatsApp group, Stalf said. They can share bills or arrange holidays. N26 will also introduce a spend history schedule, adding the ability to connect multiple cards to the app and use artificial intelligence to tag irregular and potentially fraudulent transactions, the company's chief said.
The new investment brings N26's total funding to more than $ 670 million. This is followed by a series of high-profile deals this year in the fast-growing European financial technology sector. According to CB Insights, venture capitalists pumped $ 1.7 billion into the continent's fintech industry in the first quarter of 2019 alone.
So-called neobanks like N26 have attracted millions of customers and many investments, but they have had difficulties translating their wild growth into profits. While not yet a profitable company, N26 claims that customer profit margins are improving.
"Most neo-banks are not yet profitable because they are growing fast and are new companies," said Andrew McCormack, partner at Valar Ventures, to CNBC. "N26 has very high margins on every customer who gets better and faster – which is why investors are so interested in investing."
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