Challenger banks have collectively become a force to be reckoned with in the world of consumer financial services, and one of the big players in the Nordic countries, Lunar, is announcing new investments along with two new services to continue fulfilling its ambition to provide a one-stop super app for its users.
It has raised €70 million and is launching a B2B payment and cryptocurrency exchange platform for its small and medium-sized business clients.
The new services join a growing list of offers for its users. Lunar it has a full banking license (which distinguishes it from other neobanks, which operate on behalf of other banks), and offers current and deposit accounts; loans and other credit services such as buy now, pay later (BNPL extension); investing in stocks, funds and ETFs for consumers; in addition to commercial accounts, loans and financial management for SMEs.
The last inversion is actually an extension of the Series D of the company, which had a first closing of €210 million in July 2021. The round, led in total by Heartland with the participation of Kinnevik, Tencent and IDC Ventures, closed with €280 million. This latest tranche has previous backers and a superstar: Will Ferrell, who is also starring in a marketing campaign for the startup, and asked in return to be in on the deal.
Why Will Ferrell? Ken Villum Klausen, founder and CEO of Lunar He said that the comedian is very popular in the Nordic countries, not only because of his starring role in the Eurovision movie or the fact that he is married to a Swedish woman, but also because it seems that his comic and life ethic seems to marry well. with Nordic popular culture and the broad demographic it addresses Lunar. It's a random enough endorsement that it becomes humorous in itself, exactly the kind of vehicle Ferrell associates himself with in his less marketing-focused pursuits.
Lunar it is still in the midst of an ongoing funding process. It is already moving up to its Series E, which is expected to close in May this year at an even higher valuation.
so far has raised 345 million euros in total, with previous investors including Seed Capital, Greyhound Capital, Socii Capital and Chr. Agustín Fabrikker.
One of the reasons for the rapid rate of funding of Lunar it is the fact that it is growing rapidly and wants to continue as long as the market is receptive. When it raised the first section of Series D, it had 325.000 clients. That number has now risen to 500.000 including Denmark (their base of operations is in Copenhagen), Sweden and Norway. The plan is to double down on more service offerings for the Nordic countries, which will include a launch in Finland, before expanding to more markets in Europe and beyond.
The crypto trading product underscores how the company is carrying out its expansion strategy more broadly: Villum Klausen notes that when Lunar was launched in the Nordic countries, it was already an uphill battle to position it as a “challenging” bank because core banking in the Nordic countries was already way ahead globally, with around 95% of consumers already using the services of digital banking when the startup was launched. On the contrary, it is also not so easy to enter and be a neobank in the region, because to offer any service it is necessary to integrate deeply with the existing infrastructure and a specific approach. This has proven to be a high barrier to entry for potential competitors to enter the market.
“It meant that if we could be successful as a challenger bank in the Nordics, we could be successful anywhere,” he said.
But while that seems to portend that Lunar definitely having ambitions to go beyond its Nordic shores, the startup is still focused on developing services that uncover what existing banks aren't already offering. To build those services on the platform Lunar, keep in mind that Nordic consumers and businesses are some of the most lucrative not only in Europe but in the world in terms of the value-added services they purchase, the money they transact with and the speed of purchasing services.
For example, currently Lunar it has about €1.300bn in deposits on its balance sheet, and is using it to run its loan product rather than borrow. Credit products are currently the largest generators of income in Lunar.
Cryptocurrency trading in the Nordic countries, on the one hand, is very popular, with 10 of the 20 most popular apps in the regional rankings being apps that allow cryptocurrency trading. But on the other hand, the process is somewhat stunted: people can buy currencies and exchange currencies on those apps, but if they want to withdraw money (for example, withdraw money in fiat), they cannot do it in local currencies at the moment.
“Transactions will be rejected because Nordic banks do not want to transact with international crypto platforms,” the founder noted. The reasons for this are what you would expect: there is currently no regulation in place to track those transactions to determine where the money came from or where it will go, and there is no way to insure banks against fraud or other illegal activity in those transactions. transactions.
That presents an opportunity for Lunar take the risk: bring people to your platform to trade and have them withdraw money with Lunar yourself, earning money from the exchange or service fees associated with transactions.
At launch, users will be able to trade and withdraw Bitcoin, Ethereum, Cardano, Polkadot, and Doge.
As with the crypto launch, Villum Klausen believes the complexities of offering services in what is a total potential market of just 27 million people is too small for most players to bother with, even if it is proving to be a great opportunity for the future. Still it is important to Lunar. For example, don't forget the early approach you took Klarna, and your current position.
"We also don't know why no one else entered the Nordic countries earlier," he said, perhaps because a TAM of 27 million "isn't much compared to, say, Germany," he admitted.
"But we think we can build a massive business in that smaller market." And it's a bet that investors clearly think is a good bet for now.
"The investment builds on our strategy to support best-in-class business and management teams," said Lise Kaae, CEO of Heartland. "We look forward to supporting the team in developing the first next-generation digital financial services in the Nordics and further progress."
