In today’s episode of the “Start-up of the Week,” International Finance will talk about the French fintech Qonto, which has been providing online banking services to small and medium-sized enterprises (SMEs) across Europe. Established in 2017, a significant USD 552 million Series D funding round at the start of 2022 saw the company’s valuation reach USD 4.98 billion.
The fintech offers digital banking tools to assist SMEs with their finances, providing business bank accounts, payment processing solutions, expense tracking and invoicing. Qonto also provides real-time notifications, expense categorisation and multi-user access.
Defying The Fintech Downturn
Qonto’s goal is simple: to become an all-in-one platform that can manage all things finance, from paying and getting paid to overseeing expenses, cash flow and bookkeeping, dusting off the old banking experience in the process, while acting as the “power pack for small businesses.”
The venture, as of now, has 450,000 companies as its customers, a 30% increase compared to 2022. As per a Sifted report published in February 2024, Qonto’s turnover has been in the range of several hundreds of millions of euros.
“We’ve already significantly improved our margins in the last two years. 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,” CEO and co-founder Alexandre Prot told Sifted.
With turnover increasing and its latest round of fundraising, Qonto has cash to spend and it will use the capital to jump on consolidation opportunities. The majority of Qonto’s revenue comes from monthly/annual fees paid by customers, for plans ranging from 9-299 euro per month, as well as commissions taken from every transaction made on Qonto accounts.
Qonto last posted its financial results for 2020, when the company was making a 27 million euro loss. Since then, the company has reportedly accumulated cash in the bank.
“We’ve raised a lot of money and we won’t need to raise again in the near term. What’s at stake now is to develop well in each of our markets [France, Germany, Italy, Spain]. 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,” Alexandre Prot continued, as he added 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.
Qonto bought German competitor Penta in 2022 for an undisclosed sum, which enabled it to expand its footprint in the European country by taking over the start-up’s 50,000 customers.
The Services
Qonto helps aspiring entrepreneurs create their companies in a breeze. From choosing the company’s legal structure to depositing the share capital and registering the business, Qonto provides help at every step. The fintech has partners like Firma.de (company registration service in Germany, providing administrative and legal assistance to new businesses), Finutive (Spanish entity providing personalised financial planning solutions to companies) and LexDo.it (Italy-based online legal and accounting service).
Qonto also provides business account services tailored for freelancers. The service doesn’t entertain hidden fees, surprise charges and transfer commissions, thereby scoring high on the transparency front.
Bookkeeping and invoicing are the two activities which can massively exhaust self-employed individuals. Qonto takes care of it by automatically importing the supplier invoices to its digital platform from over 10,000 connected sources for greater visibility, just to ensure that the entrepreneur doesn’t miss payment deadlines.
Qonto also scans paper receipts and stores them online, helping its clients to pre-select the right VAT rates to save time on bookkeeping. Every receipt, VAT rate and transaction gets synchronised to the business’ accounting tool in real-time.
For micro-businesses, Qonto simplifies finance and accounting management activities by helping those business leaders save time on preparing expense reports. Through the fintech’s help, a micro-business owner can order Mastercard cards for his/her team members, instead of dealing with individual expense refunds. These cards also come with their own transaction limits, apart from helping businesses keep track of expenses on a real-time basis.
For SMEs, Qonto helps the latter to make sound financial decisions with up-to-the-minute transaction updates, along with always-accurate snapshots of the business’ financial health. The SMEs get to set budgets and configure payment limits for their teams, through “Smart Company Cards,” which come with personalised spending rules, up-to-the-minute budget overviews and multi-layer approval workflows for custom amounts. Qonto also assists these businesses in undertaking international transfers to more than 130 countries.
The SMEs can also conduct instant SEPA (Single Euro Payments Area) transfers of up to 50,000 euro and direct debits through a range of smart & reliable payment cards, with options for commission-free foreign purchases.
Qonto’s solutions for SMEs also include the automation of time-consuming financial tasks like issuing certified expense receipts, accelerating reconciliation, along with VAT and payment information detection. The fintech’s built-in invoicing feature helps businesses to get paid faster and save more time on issuing supplier invoices. And this service covers some 29 currencies.
Business Accounts, Cards And More
Qonto helps businesses open bank accounts with a French IBAN (International Bank Account Number) in 10 minutes (powered by Physical and virtual Mastercards), with features like SEPA instant and international transfers. As per the fintech, the business account service has won the trust of over 500,000 SMEs and freelancers.
The fintech’s “Invoice Management” is known for issuing invoices that are compliant with current French legislation, including rules around data protection and storage. The tool, which can be directly integrated with a business account, seamlessly manages the company’s finances excluding VAT.
“Invoice Management” generates and sends quotes and invoices in less than a minute, while automating the entire invoice and payment tracking process. The solution also helps businesses receive instant SEPA transfers, and real-time transaction notifications.
Qonto’s “Expense & Spend Management” tool is all about ensuring efficient finance management that lightens the daily workload of the business leaders. Through “Expense & Spend Management,” business leaders can delegate financial tasks to their teams; with multi-layered approval workflows to control spend in real time. The entrepreneurs can simplify things further by setting separate budgets and tracking the cash flow through dashboards. The tool, which comes with fully customisable payment card limits and cash transfers, also helps its users to export data automatically to their preferred business software to eradicate entry errors, while saving time.
Finally, when it comes to bookkeeping, Qonto helps businesses automate the tiresome and mundane processes like supplier invoice processing and data entry, accelerating the overall account reconciliation activities. The user can import his/her supplier invoices to Qonto from the computer, mailbox, Google Drive, and Dropbox, where they get automatically linked to the right transaction.
The Road Ahead
Qonto, which has set up its in-house card payment system, in collaboration with Mastercard, now faces a question: whether or not it should become a fully regulated bank, which would enable it to offer services like loans and open up a whole new stream of revenues.
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. The fintech recently hired brand-new CFO Anita Szarek.
While the move might hint towards the venture heading towards the IPO route, Szarek said, “We are well-funded and we have enough firepower to continue our growth as it is. An IPO could be an event at some point but that’s not the strategy.”
Apart from being profitable by 2026, Qonto wants to reach one million customers by 2025. The strategy is to increase revenue without indulging in cost-cutting measures. The venture 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.
In July 2024, the venture announced two new features to offer better business banking solutions to its customers. The first was a new strategic partnership with Wise Platform to enhance Qonto’s cross-border payment capabilities further. The second was the upcoming launch of the SEPA Direct Debit collection feature, which will enable Qonto customers to get paid on time and centralise all incoming payments in the app.