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Dutch online bank Bunq applies for U.S. banking licence
Global Banking & Finance Review®
Company
By Toby Sterling
AMSTERDAM (Reuters) – Bunq BV, a prominent European online banking start-up, formally filed for a banking licence with U.S. regulators on Tuesday, the company’s CEO told Reuters in an interview.
Ali Niknam, the Canadian-Dutch entrepreneur who founded Bunq in 2012, said his bank is attracting depositors in Europe despite jitters following the collapse last month of Silicon Valley Bank in the U.S.
“When things are bad, that’s the best time for us,” he said. “That’s when people reconsider their choices, which is precisely the moment we need to get a foot in the door.”
An expansion to the U.S. would help Bunq, which turned a 2.3 million euro ($2.50 million) profit for the first time in the fourth quarter of 2022, grow more quickly after years of investing in its software and operations.
Bunq raised $228 million at a $1.9 billion valuation in 2021.
Niknam said the bank’s U.S. target group will be the 5 million European expatriates and European businesses operating in the U.S.
“Speaking from personal experience, getting a bank account in the U.S. as a European citizen is a headache,” he said.
Bunq, which competes with Britain’s Revolut and Germany’s N26, said that as of March 14, it had deposits of around 2.3 billion euros, up 27% from 1.8 billion euros at the end of 2023.
Revolut is also seeking a U.S. licence, while N26 of Germany gave up trying to get into the U.S. market in 2021.
Niknam said the influx of depositors was mostly because Bunq offered better interest on deposits than traditional banks, but also beause people are opening additional accounts at Bunq to ensure they fall within European deposit insurance limits of up to 100,000 euros.
Bunq offers savers in its native Netherlands 1.56% interest on deposits, a percentage point above rates offered by the three big banks that dominate Dutch banking, ING, ABN Amro and Rabobank.
Bunq makes some mortgage loans but keeps more than half of its reserves at the European Central Bank’s deposit facility, which Niknam said should reassure depositors.
The company’s business model resembles that of “freemium” software, offering users a free savings account with limited features, and more advanced features with a monthly subscription costing from 3 to 18 euros per month.
($1 = 0.9199 euros)
(Reporting by Toby Sterling; editing by Barbara Lewis)
A banking license is a legal authorization granted by regulatory authorities that allows a financial institution to operate as a bank and offer banking services to customers.
Deposits are funds placed into a bank account by customers, which can be withdrawn or used for transactions. Banks often pay interest on these deposits.
Profit is the financial gain obtained when the revenue from business activities exceeds the expenses, costs, and taxes associated with those activities.
A freemium model is a business strategy where basic services are provided free of charge, while advanced features or services require payment.
Interest on deposits is the amount paid by a bank to depositors for keeping their money in the bank, usually expressed as a percentage of the deposit amount.
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