Qonto Seeks Banking License in France
One burning question that comes up frequently regarding French fintech startups is whether Qonto is a real bank. Currently, the answer is no, but things might change soon. CEO Alexandre Prot has announced that Qonto is in the process of applying for a banking license in France.
Targeting European freelancers and small to medium-sized businesses (SMBs), Qonto operates under a payment institution license secured in 2018. They’ve already introduced a Buy Now, Pay Later (BNPL) option. However, securing a credit license is crucial for offering customers more comprehensive financial services, like savings and investment opportunities.
With its existing EU license, Qonto has successfully expanded into multiple European markets, amassing around 600,000 customers. Yet, without a credit license, their goal of reaching 2 million customers by 2030 remains a challenge.
Offering a broader range of solutions feels like a strategic move to compete with traditional banks. However, obtaining a banking license and providing credit isn’t straightforward. This explains why competitors in the SMB fintech space have diversified their strategies, while Qonto has been a bit slower to adapt.
For instance, Memobank was established as a bank from day one and has been offering loans to SMBs. On the other hand, FINOM is operating under an electronic money agency license but is only beginning to explore lending options. Revolut, with its Lithuanian license, has yet to offer credit services for businesses but has plans to roll out such offerings soon.
Meanwhile, the marketing prowess of its competitors, bolstered by both B2C and B2B funding, signals to Qonto the need for urgency, especially with Revolut announcing its intent to acquire French licenses and establish its headquarters in Paris.
While not directly addressing competitors, Prot indicated that Qonto’s timeline was influenced by achieving profitability sooner than anticipated in 2023. Prot, who has connections to former BNP Paribas President Baudouin Prot, was already considering the prospect of a credit license. At one point, he and co-founder Steve Anavi deemed the idea too resource-intensive and complicated.
By being profitable since 2023, Qonto now operates with a solid financial base—having raised $552 million in 2022, linked to a $5 billion valuation. Prot mentioned that substantial mergers and acquisitions often spur capital raises, and Qonto has completed two acquisitions in its eight years of existence.
These acquisitions include German competitor Penta and the accounting and financial automation platform Regate. Through these steps, Qonto positions itself not just as a bank but as a comprehensive financial management solution provider, which also encompasses invoicing and bookkeeping tools.
This direction has driven growth in the B2B sector, with Germany now being its second-largest market, following France. Spain and Italy are next in line, along with planned entries into Austria, Belgium, the Netherlands, and Portugal within the next year.
Despite these achievements, Prot acknowledged that some customers opt for credit institutions, as this adds security to their deposits. They wish to have access to credit options if needed.
Qonto confirmed the demand for credit through its recent services. Set to launch in 2024, it announced funding totalling €50 million (about $59 million), though this is constrained by its current licenses. Borrowing is limited to internal equity for customers, who are unable to access credit beyond a year.
Qonto also aims to assist customers in obtaining various loans through collaborations with fintech partners like Deftaco, Karmen, River Bank, and Silvr, with plans to maintain these offerings for the foreseeable future.
Nevertheless, acquiring a credit institution status would significantly enhance Qonto’s revenue potential, tapping into both lending margins and deposit-related income. Although Prot refrained from disclosing exact revenue numbers, he did note a 30% increase last year.
Despite this revenue growth, Prot insists that the primary goal is acquiring new customers. Qonto sees this as an opportunity to lessen reliance on external institutions and quickly develop new products. Recently, they’ve built in-house card processing capabilities aimed at improving acceptance rates while decreasing dependence on third parties.
With a team of 1,600, Qonto is hopeful about its capacity for new product innovations, including an AI-driven intelligence layer, aiming to bolster its banking infrastructure and risk management. This effort is also about demonstrating readiness to French banking regulators while working closely toward obtaining their license. Though the process could span several years, it forms part of Qonto’s broader growth strategy, which has recently brought several senior profiles on board. These initiatives may one day lay the groundwork for a potential IPO, although that’s still a distant prospect.
