May 26, 2022

Collectively, Challenger Banks has become a force in the world of consumer financial services, and today with two new services to realize its ambition to become a one-stop super-app for one of Scandinavia’s major players – Lunar – along with the announcement of development finance. its users. The startup has raised €70 million ($77 million at current rates), which I understand is a $2 billion valuation, from someone close to the company; And with this news, he is launching a crypto trading platform and B2B payments for his small and medium business clients.

New services complete the growing list of offerings for users. Lunar has a full banking license (which distinguishes it from many other neobanks that operate on the model of other banks), and also offers settlement and deposit accounts; Loans and other lending services such as Buy Now, Pay Later; Investing in consumer stocks, funds and ETFs; Plus business account, credit and financial management for small and medium businesses.

A few more details about this latest investment: it’s actually a continuation of the D-series of a company that first raised 210 million euros last July. The round, led by Heartland as a whole and including Kinnevik, Tencent and IDC Ventures, ended with €280 million. This latest release includes previous sponsors (Lunar doesn’t write names), but perhaps more specifically (sorry, VC), it also features a superstar: Will Ferrell, who also starred in the startup’s marketing campaign. , and the latter intervened.

(Why Will Ferrell, I asked Lunar founder and CEO Ken Willem Clausen? He said that the comedian is popular in Scandinavia not only because of his role in the Eurovision movie or the fact that he married a Swedish woman. That their humor and the life ethic aligns well with Scandinavian pop culture and the wider demographic centered on the Moon, it has enough casual endorsements to make it a humorous self-directed activity.)

I should also note that Chandra is still in the pre-funding process. My understanding is that he is already increasing his Series E, which is expected to close this May with an even higher valuation.

It has now raised a total of €345 million with other previous investors including Seed Capital, Greyhound Capital, SoC Capital and Chr. Producer Augustine.

One reason for the fast pace of lunar funding is the fact that it moves quickly and tends to strike when the iron is hot. When the first issue of Series D came out, it had 325,000 subscribers. This number has now increased to 500,000, including Denmark (home in Copenhagen), Sweden and Norway. The plan is to provide more services for Scandinavia, including a launch in Finland, before expanding to other markets in Europe and beyond.

The cryptocurrency trading product highlights how the company is largely pursuing its expansion strategy: Willam Clausen explains that when Lunar launched in Scandinavia, it was already determined to establish itself as a challenger bank. . Scandinavia already leads the world, with about 95% of consumers already using digital banking services from existing operators. On the contrary, it is not easy to simply enter this sector and become a neobank, as the services offered require you to deeply integrate with existing infrastructure and a specific approach based on identification numbers, they said. This proved to be a high barrier to entry for potential competitors.

“It meant that if we could succeed as a challenger bank in Scandinavia, we could succeed anywhere,” he told me with a laugh.

But while Chandra definitely seems to have ambitions to expand beyond its Scandinavian shores (name and stratosphere fit), the startup is actually still focused on building services that solve this problem. Guess what the incumbents have yet to do. Embed these services in the Lunar platform, not least because it indicates that Nordic consumers and businesses are among the most attractive services not only in Europe but in the world because of the added value they receive and things that they are doing. money issue. soon.

Example: He told me that Lunar currently has around $1.3 billion in deposits on its books, and he uses that to sell his loan product instead of taking out loans. Loan products are currently Lunar’s biggest source of income, he said.

In this context, crypto trading has a strange place in Scandinavia, Willem Clausen told me. On the one hand, it is very popular: 10 of the 20 most popular applications in the regional ranking are applications that allow you to trade cryptocurrency. But on the other hand, the process is somewhat limited: people can buy currency and exchange currency in these applications, but if they want to receive money (for example, cash out fiat), they cannot do it in local currency. I can do at the moment. ,

“Transactions are being rejected because Scandinavian banks do not want to transact with international crypto platforms,” he said. There are quite expected reasons for this: currently there is no regulation to track these transactions, to establish where the money goes from and to, and banks have to deal with fraud or other things. activity. in these transactions.

This gave Lunar the opportunity to take the risk of bringing people to the trading platform and cashing out from Lunar itself, earning money from the exchange or service fees associated with the trades. (Which I think, calculated, more than offsets the risk of providing this service with no rules or other rules in the first place.)

At launch, users will be able to trade and withdraw cash in Bitcoin, Ethereum, Cardano, Polkadot, and Doge.

With the launch of the cryptocurrency, Willem Clausen believes that the complexity of offering services to a target market of only 27 million people is too low for most players, although it is a large niche. High profit for Chandra as a large company and a very regional player. (It’s also worth mentioning Klarna’s original approach and seeing where it stands now.)

“We don’t even know why no one has entered Scandinavia before,” he said, but TAM’s 27 million “is not that much compared to Germany,” he admitted.

“But we believe we can build a big business in this small market.” And this is a game that investors are clearly seeing as a good bet right now.

“The investment is based on our strategy of supporting the best companies and management teams,” Heartland CEO Lis Kay said in a statement during the announcement of the first tranche. IWe look forward to supporting the team in developing the next generation of digital financial services in Scandinavia and beyond.

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