French B2B neobank Qonto reaches 600,000 customers, files for banking license

Qonto, the French fintech startup, is on the verge of a significant transformation. In a recent announcement, CEO Alexandre Prot confirmed that the company has officially applied for a banking license in France. This change comes as Qonto reaches a remarkable milestone of 600,000 customers, primarily consisting of European freelancers and small to medium-sized businesses (SMBs). Currently operating under a payment institution license acquired in 2018, Qonto has been able to offer limited financial services, including a buy now, pay later (BNPL) option. However, obtaining a credit institution license would enable the firm to expand its offerings significantly, allowing it to provide a wider range of lending, savings, and investment services. This is particularly crucial as Qonto sets ambitious goals, aiming to grow its customer base to 2 million by 2030. Despite its current success, Qonto faces challenges in competing with established banks and other fintech players. Competitors like Memo Bank started as banks, providing lending solutions right from the beginning, while Finom recently began testing its lending capabilities under an electronic money institution (EMI) license. Meanwhile, Revolut, which holds a full Lithuanian license, is also preparing to roll out credit options for businesses. Prot emphasized that Qonto's decision to pursue a banking license was influenced by the company's early profitability in 2023. Having secured $552 million in funding in 2022 at a valuation of $5 billion, Qonto is now better positioned to tackle the challenges of becoming a credit institution without requiring substantial new fundraising. Over its eight-year history, Qonto has made two strategic acquisitions, including the takeover of its German competitor Penta and the purchase of the accounting platform Regate. These moves reflect Qonto's strategy to evolve beyond traditional banking services and position itself as a comprehensive financial management solution. While Qonto's customer base spans several European markets, including Germany, Spain, and Italy, Prot acknowledges that some potential clients may be hesitant to choose Qonto without its credit institution status. The additional guarantees on deposits and the availability of credit are compelling factors for many SMBs. To address customer needs, Qonto has introduced a 'financing hub' in collaboration with third-party fintech partners, providing access to various loan options. Although the current limitations of its license restrict the company's lending capabilities, Qonto's recent Pay Later service has already facilitated €50 million in financing. As the company strives to enhance its offerings, Qonto is also focusing on building its internal capabilities, including developing an in-house card processor and the AI-enabled 'Qonto Intelligence' layer. With a team of 1,600 employees, the startup aims to streamline operations and improve risk management as it prepares to work closely with France’s banking supervisor to secure its license. While the licensing process may take some time, Qonto is eager to establish itself as a key player in the financial landscape, potentially laying the groundwork for a future IPO as it continues to expand its board with experienced professionals.