German fintech unicorn N26 just had its first profitable quarter

Ten years after taking the stage at TechCrunch Disrupt in London, fintech N26 reported its first quarterly profit (before tax). The challenger bank with millions of customers across Europe generated a net operating income of €2.8 million in the third quarter of 2024 (or $2.9 million at current exchange rates).

This is an important milestone for the startup but also important news for the fintech industry. Challenger banks like Monzo, N26, Revolut and Starling used to be some of the hottest startups in Europe. They’ve raised billions in funding, they’ve gone big, and they’ve spent a lot of money to get to that next round of funding.

Now, it’s time to sit down and do the math. Big money opportunities are hard to come by and investors now often need a clear way to make a profit.

Revolut is more profitable – $428 million in net profit in 2023 alone – while Monzo just crossed the line with pre-tax profit of £15.4 million in 2023 ($19.4 million). The N26 also follows the trail.

For several years, the German financial regulator BaFin has limited new registrations as a penalty to force the initiative to improve anti-money laundering procedures. But it raised the cap earlier this year and that had a big impact on the company’s mindset.

According to N26, more than 200,000 people open an account every month. Interestingly, N26 has stopped sharing the total number of users it has. Instead, the company is focusing on its 4.8 million “income eligible” customers.

The influx of new users has led to a 40% increase in fintech profits 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 and access to financial services and additional features. The company also offers savings, stock, and crypto trading accounts and credit products.

Now, let’s see if N26 can stay in the black as 50% of the 2024 revenue comes from interest income from customer deposits and the company’s lending activities. As interest rates fall in Europe, that source of income will be more difficult to maintain.