It’s hard to walk around Paris these days without coming across an advert for French neobank Qonto.
The company’s black-and-white logo is stuck on bus stops and escalators across the capital alongside punchy slogans inviting business owners to sign up. The promise? An all-in-one platform that can manage all things finance, from paying and getting paid to overseeing expenses, cash flow and bookkeeping.
The ads seem to be working. Qonto, which was last valued at $5bn in 2022, claims 450k companies as customers, a 30% increase compared to 2022. Two sources with knowledge of the company’s financials say its turnover is in the range of several hundreds of millions of euros (Qonto declined to confirm).
The company isn’t profitable but is aiming to become so in the next couple of years. “We’ve already significantly improved our margins in the last two years,” says CEO and cofounder Alexandre Prot. “Looking at our plans for 2025, we’re pretty confident that our costs will increase a little bit, our revenues will increase a lot, and we will reach profitability.”
That puts Qonto in a much stronger position than many of its competitors.
“It’s never done until it’s done, but they’ve taken the market, and by quite a distance,” says Raffi Kamber, who led French VC Alven’s first investment in Qonto in 2016. (Kamber has since left Alven and Qonto’s board to start his own firm, Singular.)
With turnover increasing and its latest round of fundraising, a €486m Series D in 2022, Qonto has cash to spend. And it intends to use it to jump on consolidation opportunities — especially in a sector that’s seeing many companies reaching the end of their runway.
“Everyone right now knows that Qonto is looking to buy the whole world,” says one fintech founder.
Cash in the bank
The majority of Qonto’s revenue comes from monthly or annual fees paid by customers — for plans ranging from €9-299 per month — as well as commissions taken from every transaction made on Qonto accounts.
But the past year has seen a brand-new source of income: interest rates.
From a regulatory perspective, Qonto is not a bank but a payment institution, meaning it has to protect its customers’ money by separating it from its own cash flow. To do this, Qonto fences customers’ funds in the books of partner banks like Natixis and Crédit Mutuel Arkea.
Given that these partners can use this money for their activities, Qonto has individual agreements with them to get partially remunerated in times of positive interest rates.
With the European Central Bank (ECB) gradually increasing interest rates from 0% in 2022 to 4% at the end of 2023, this has the potential to have generated about €100m extra turnover for Qonto in 2023, according to estimates from two sources with knowledge of the sector (Qonto declined to confirm).
This is unlikely to remain a long-term source of revenue for the company — but Qonto is adamant that its business model is resilient to changing interest rates.
“Our yearly growth in 2023 was 50%, excluding interest rates,” says Prot. “It is the result of a diverse set of strategies and not only linked to the fluctuation of interest rates.”
An eye for deals
Qonto last posted its financial results for 2020, when the company was making a €27m loss.
Since then, it seems the company has accumulated cash in the bank. “They have exceptional financial results for a scaleup of this size,” says one source with direct knowledge of the company. “This combined with their last fundraise means they have plenty of resources.”
“We’ve raised a lot of money and we won’t need to raise again in the near term,” says Prot. “What’s at stake now is to develop well in each of our markets [France, Germany, Italy, Spain].”
That could involve making some acquisitions, says the CEO. “In the current context where some companies are more open to being bought (...), we’ll grow organically but also potentially with one or two targeted acquisitions.”
Prot says that those acquisitions would likely add to the range of services Qonto offers its customers — which currently include accounting and invoicing, on top of banking — and could increase the number of customers taking up premium subscription plans.
“It’s the perfect acquirer in the current context,” says Kamber. “A platform that wants to offer the largest range of services for its clients becomes the natural buyer for many fintechs that are very verticalised.”
Qonto bought German competitor Penta in 2022 for an undisclosed sum — its only acquisition to date — which enabled it to expand its footprint in the country by taking over the startup’s 50k customers. The company has a dedicated M&A team that's checking out opportunities for deals large and small.
“They have such success and such financial flexibility that (...) they are, at the very least, looking at every potential deal,” says one source with direct knowledge of the company.
Three sources with knowledge of the sector say Qonto has been in advanced discussions to acquire French financial management platform Regate. Qonto declined to comment.
The race is on against competitors like fellow French unicorn Pennylane, which originally provided accounting services but also offers customers the option to open a professional bank account. Pennylane recently raised a €40m Series C that will be dedicated to M&A, to expand its service range — and making the company a significant rival.
From payments to banking
A question unlikely to go away for Qonto is whether or not to become a fully regulated bank — which would enable it to offer services like loans and open up a whole new stream of revenues.
Banking services are extremely lucrative for some neobanks. For example in 2021, UK fintech Revolut’s revenues in Europe (£432m), where it has a banking licence, were more than double those of the UK (£195m), where it doesn’t, according to its most recent company accounts.
“Instead of earning revenue on customer funds thanks to interest rates that are bound to go down, why not use these funds to make loans that are remunerated at much more interesting rates?” says Jonathan Userovici, fintech investor at US VC Headline, which does not count Qonto in its portfolio. “I think that’s a huge question for Qonto.”
Customers can access loans on Qonto, but only thanks to a partnership with French fintech Defacto. Providing the service directly could be another boost to Qonto’s margins.
From its very early days, Qonto has pondered this question. One investor in the company says that in 2019, Qonto’s cofounders came close to opening a banking subsidiary, but backtracked when they realised that regulations required them to freeze around €100m to ensure they stayed solvent — money that investors expected them to invest in growth.
It’s not obvious that becoming a regulated bank is the right call for Qonto. Such a move would come with significant operational hurdles, and there is no guarantee that customer demand will compensate for the cost.
Meanwhile, remaining a payment institution has enabled the company to be more flexible and grow quickly.
“Qonto made the bet of offering a lighter service at the very start but entering the market extremely quickly,” says Kamber.
“The question now is: how far should they push their offer of services?”
Qonto has said that becoming a bank is not on the cards anytime soon. But some say the company will eventually have to consider it.
“Qonto’s comparables are banks which are largely profitable thanks to loans,” says Userovici. “So the question is — how will Qonto accelerate on this topic?”
What’s next for Qonto?
At a time when many unicorns are losing their horns, Qonto stands out as one of French tech’s most resilient companies.
“If they were to exit in the next few months, they might be a little bit below their valuation. But in the medium or long term, there is no doubt about Qonto. They completely have the capacity to catch up with their valuation,” says Userovici.
Qonto recently hired brand-new CFO Anita Szarek, and while that might hint at a potential IPO, she is adamant that an exit is not yet on the near-term horizon.
“We are well-funded and we have enough firepower to continue our growth as it is,” says Szarek. “An IPO could be an event at some point but that’s not the strategy.”
The immediate priority? In addition to turning a profit, Qonto wants to reach 1m customers by 2025.
“We’re on the right track to reach our objectives in 2025, even if there is still work to do to get there,” says Prot. “What’s certain is that the strategy is increasing revenue, not cutting costs.”
It’s not just about consolidation. The founder says it plans to hire for “hundreds” of roles in the coming months, in addition to the company’s current 1,300-strong workforce, as well as making a “massive” investment in marketing. It looks like Qonto’s ads aren’t going anywhere.
