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N26

Neobank


Investment strategy Pre-IPO

N26 is a German neobank founded in 2013.

The company offers mobile banking solutions to customers. Users of the application can open a current account remotely and make transactions around the world. N26 offers deposits, short-term loans, insurance, investments.

N26 is a leading European neobank that operates under BaFin license.

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Financial Data N26

  • Total funding: $819 m
  • Last round $570 m — Series D
  • Company valuation at the last round: $4.1 b
  • Share price at the last round: $29 300
  • Date of the last round: May 2020
  • Lead investors: Allianz X, Tencent, Horizon Ventures, Insight Partners, Peter Thiel Valar Ventures

Investment opportunity

  • In January 2021, the number of the bank’s users exceeded 7 million across 25 countries. In 2020 alone, 2 million new users were connected to the service.
  • Monthly transaction volume has increased up to €5,5 billion.
  • In May 2020, the company expanded its funding for round D by an additional $100 million, bringing the current round to $ 570 million. The lead investors were Allianz X, Peter Thiel and Tencent.
  • In July 2019, the company launched the service in the United States. In January 2021, the number of US users reached 500,000.
  • In January 2021, N26 received a license to operate in Brazil. The major Brazilian competitor Nubank has over 34 million users in Latin America.
  • In April 2021, the company abandoned Allianz Group insurance tools and created its own line of N26 Insurance.

According to research by Forbes and Statista, N26 was selected as the best international bank in 2021.

Market outlook

According to F&F Research, the global neobank market was valued at $ 18.6 billion in 2018 and is expected to reach $ 580 billion by 2027. The market is estimated to grow at a compound annual growth rate (CAGR) of 46.5% from 2019 to 2027.

In 2020 alone, the largest neobanks earned more than $ 3.6 billion in revenue.

Revenue of biggest eight neobanks of Europe and US

Source: MEDICI, Forbes, Company Data

The largest players in the market and the main competitors of N26 are American Chime and SoFi and neobanks from Great Britain: Revolut, Monzo, Starling, etc. The world’s largest neobank with the biggest client base is the Brazilian NuBank with 34 million users.

Neobanks are now focusing on serving corporate clients. They accounted for more than half of new accounts among European neobanks, according to GrandViewResearch.

Neobanks offer businesses solutions with advanced interfaces and valuable information for services such as accounts payable and receivable, payments, and bank statements.

Competitve analyses: N26 vs Revolut

The main competitor of N26 is Nikolay Storonsky’s neobank Revolut. We conducted a competitive analysis of companies based on the available data: current estimates in the secondary market, number of customers, transaction volume for 2020, average deposit amount in 2021, and number of site visitors for April 2021.

 N26Revolut
Secondary market valuation/ May2021$4,6 b$9,4 b
Users7 m15 m
Transaction volume  2020$79 b$91 b
Average deposit 2021$580$410
Website visitors 20213,53 m4,75 m

Comparative analysis indicates that N26 is undervalued relative to Revolut by approximately 40%.

Revolut has a valuation twice as large, but the volume of Revolut transactions for 2020 exceeds the volume of N26 transactions by only 15%. The difference in website visitors is also less significant.

 N26RevolutN26 Potential 
Valuation/users657,14626,67-5 %
Valuation/Transaction volume0,060,1077 %
Valuation/ Average deposit1,131,5335 %
Valuation/Website visitors1303,121978,9552 %
   40 %

Financial performance N26

  • According to N26, revenue in 2019 was €100m (+ 112% YoY).
  • Net fee and commission income including paid subscriptions and payment services, increased by 244% y / y and amounted to € 47.5 million.
  • Net interest income also increased by 82% to € 9.3m due to the expansion of treasury activities and lending products and services.
  • For 2019, the company suffered a loss of € 110m (€ 160m for 2018, -36% YoY). Large expenditures fell on the expansion of personnel in Berlin, Vienna, and Barcelona.
  • The company plans to spend recently raised $ 100 million to expand its technology hub in Berlin.

Funding rounds of N26

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Risks

  • UK branch of N26 had to be closed due to complications after Brexit, which led to a loss of about $ 26 million. International regulation in the financial sector could negatively affect the development of both the company and the industry.
  • High competition with existing neobanks and additional pressure from traditional banks.
  • Without any physical branches and the highest competition, neobanks can charge the lowest or even zero interest rates. This translates into low business margins. Finding profitable products can take a long time.

How to buy N26

To buy N26 shares, contact our managers.