Introduction to Qonto

One of the most frequently asked questions about Qonto, a French fintech startup, is “Is Qonto a real bank?” The answer to this question is no, but this may change in the future. Qonto has recently filed for a banking license in France, as revealed by its CEO, Alexandre Prot.

Current Operations and Limitations

Currently, Qonto operates with a payment institution license obtained in 2018. This license allows the company to offer certain financial services, including a form of buy now, pay later (BNPL) to its target customers, which are European freelancers and small to medium-sized businesses (SMBs). However, with a credit institution license, Qonto would be able to offer a broader range of lending, savings, and investment options.

Expansion and Customer Base

Since its current license is valid across the European Union, Qonto has been able to expand into several European markets. The company has recently reached the milestone of 600,000 customers. Nevertheless, the lack of a credit license hinders its goal of reaching 2 million customers by 2030.

Competitive Landscape

Offering a more comprehensive financial solution seems like a natural move for Qonto to compete with incumbent banks. However, obtaining a banking license and rolling out credit services is not an easy task. This explains why Qonto’s competitors in the SMB fintech space have approached this issue in different ways. For instance, Memo Bank was founded as a bank and offers lending to SMBs, while Finom operates with an electronic money institution (EMI) license and has only recently started testing lending services.

Market Dynamics and Competitor Strategies

Revolut, another major player, has a full Lithuanian license but has yet to roll out credit options to businesses, although it plans to do so this year. The marketing power of well-funded competitors operating in both B2C and B2B spaces may have prompted Qonto to accelerate its plans, especially given Revolut’s recent announcement to seek a French license and establish its Western Europe HQ in Paris.

Qonto’s Decision to Pursue a Banking License

According to Prot, Qonto’s decision to pursue a banking license is driven by its achievement of profitability ahead of schedule in 2023. This milestone means that Qonto can now undertake the process of obtaining a banking license without needing to raise additional funding beyond the $552 million it secured in 2022 at a $5 billion valuation.

Background and Previous Considerations

Prot, the son of former BNP Paribas President Baudouin Prot, had previously considered pursuing a credit license but dismissed the idea due to the time and additional fundraising it would require. With profitability achieved, this hurdle is no longer a significant obstacle.

Recent Acquisitions and Strategic Positioning

Qonto has made strategic acquisitions to bolster its position, including taking over its German competitor Penta in 2022 and buying accounting and financial automation platform Regate in 2024. These moves reflect Qonto’s positioning beyond banking as an integrated finance management solution, including tools for invoicing and bookkeeping.

Market Presence and Customer Growth

This approach has helped Qonto grow in the B2B segment across Europe. While Prot did not provide a full breakdown of its 600,000 customers, he mentioned that Germany is now Qonto’s largest market after France, followed by Spain, Italy, and the markets it entered in late 2024, including Austria, Belgium, the Netherlands, and Portugal.

Demand for Credit Services

Qonto has validated the demand for credit services with its Pay Later service, which has facilitated €50 million in financing since its launch in 2024. However, the current license limits both Qonto’s lending capabilities and the duration for which customers can borrow.

Partnerships and Financing Solutions

To address this, Qonto has established a “financing hub” with third-party fintech partners, including Defacto, Karmen, Riverbank, and Silvr, to offer its customers access to other types of loans. Prot indicated that Qonto plans to maintain this hub for at least a few more years, as some of these offerings are more specialized than what Qonto may want to offer directly.

Future Prospects and Revenue Growth

Becoming a credit institution would unlock new revenue streams for Qonto, both from credit margins and deposits that could be used for lending. Although Prot did not disclose specific revenue figures, he mentioned that revenue increased by 30% in the last year. However, the primary motivation for seeking a banking license is not additional revenue but rather the ability to launch new products faster and depend less on third-party services.

Internal Developments and Regulatory Readiness

Qonto has been enhancing its capabilities, including building an in-house card processor to increase acceptance rates and reduce reliance on third parties. With a team of 1,600 people, Qonto aims to have the bandwidth to work on new product developments, such as the AI-enabled “Qonto Intelligence” layer, while also strengthening its banking infrastructure and risk management teams.

Conclusion and Future Outlook

The pursuit of a banking license is part of Qonto’s broader “growing up” effort, which includes adding senior profiles to its board of directors. These steps could lay the groundwork for a future IPO, though that remains a longer-term prospect. Qonto plans to work closely with France’s banking supervisor to demonstrate its readiness for a banking license, a process that may still take years but is crucial for its strategic goals.