French unicorn Lydia, a popular payments app for French Gen Z and millenials, is investing €100m over the next three years to double down on its banking services.
Despite that spend, cofounder Cyril Chiche told a press event today that he expects his company to hit profitability next year.
The Accel and Tencent-backed company, which started as a peer-to-peer payments app in 2013, has provided digital banking options in the form of deposit accounts and card products in France for years. It is migrating these banking services onto a new dedicated app called Sumeria.
The company says that 2m customers are already using Lydia’s banking services in France and it aims to have 5m users on Sumeria across the country by 2027.
Lydia will hire 400 recruits in France in the next three years to work on Sumeria — more than doubling its current team of 250. In that time, the company is also hoping to secure a banking licence for the new organisation to start providing credit services.
“[Sumeria] is the affirmation of our strategy and direction,” Chiche said.
The Lydia app will continue to focus on the historical peer-to-peer payments services.
Reaching profitability?
Chiche said that Lydia doesn’t need to raise more funds to support the development of Sumeria.
The fintech has raised €235m to date, including a $100m Series C in 2021 and Chiche said that the €100m investment in Sumeria will be backed by money that Lydia already has in the bank, as well as by the positive cash flow that the company hopes to be generating by next year.
The company’s profitability goal is one that’s been set before. The cofounder previously told Sifted the objective was to reach the milestone for the French part of the business — which represents almost all of Lydia’s activities — in 2023.
“We are not profitable yet but our deposit accounts activity is profitable,” says Chiche. “Since the start of 2023, we’ve had a pretty clear trajectory towards profitability.”
Going international
Lydia’s decision to focus on digital banking services sees it jump head first into a highly competitive market that includes major players like the UK’s Revolut, Monzo — which just raised a $430m funding round — and Germany’s N26.
The French company is a household name in its home country, where it says that it is used by almost half of 18-35-year-olds — but it is yet to make a mark in the rest of Europe. Of its 8m total user base, only a small fraction is based outside of the country.
Lydia says that it will initially focus on developing Sumeria in France before expanding to other countries.
“Europe is a step that we are working on,” said Chiche. “For now, we are developing at scale in France. It’s important to be strong in our home country before we go elsewhere.”
“From the moment we obtain our banking licence, we will expand to other countries, starting with Germany.”
