N26 has catapulted to a $3.5 billion valuation shortly following its US debut

• This is an excerpt from a story delivered exclusively to Business Insider Intelligence Banking subscribers.
• To receive the full story plus other insights each morning, click here.

German neobank N26 was catapulted to a $3.5 billion valuation after extending its Series D funding round to $470 million, according to Bloomberg. This valuation closely follows its US debut, where it amassed a 100,000-member wait list.

N26 has plans to expand into Brazil next year with ambitions to reach 50 million customers globally. For context, Revolut, a UK-based neobank and a direct competitor, trails behind N26 with a valuation of $1.7 billion.

N26 has seen rapid growth since launching in 2015, recently reaching 3.5 million users. That user milestone marked a 40% increase from February of this year, and it's still adding 10,000 users a day. Additionally, the firm handles €2 billion ($2.3 billion) in monthly transactions across 24 European markets.

N26's mobile app comes with several personal finance management (PFM) tools that differentiate it and likely led to its viral uptake: Users can categorize every transaction, set daily spending limits, and lock and unlock cards. Customers an also open "Spaces," or sub-accounts to reach their financial goals by dropping money in and out of them. And it doesn't charge minimum balance, monthly maintenance, or foreign transaction fees.

N26 faces stiff competition in the US - here's how it stacks up among US neobanks:

• Chime recently surpassed 4 million users, adds more than 200,000 new users monthly - quadrupling its user base in one year - and its valuation reached $1.5 billion during its last funding round. The firm offers emerging digital features like a chatbot for customer support.
• Aspiration counts more than 1 million customers and is adding around 100,000 users per month. It markets itself as "anti-Wells Fargo," and offers features like automated savings functions and integrated investment features.
• Varo tripled its user base in the past year and is expected to reach 750,000 registered customers this month. It raised $100 million in a Series C funding round earlier this year and is in the process of applying for a national bank charter from the OCC.
• Moven was an early starter in the US neobank space and counts 250,000 users since its 2011 launch. Moven also offers Banking-as-a-Service (BaaS) solutions to established banks.

The increasing size of neobanks could soon close the window of opportunity for legacy banks to acquire them. Legacy banks have been developing their own digital services: Wells Fargo offers a digital offshoot, Greenhouse, and Citi is reportedly pursuing a digital-only bank aimed at credit cardholders, for example.

But developing, launching, and marketing these services can be resource- and time-intensive, with no guarantee of success: For instance, JPMorgan Chase discontinued its digital-only bank Finn after one year.

Buying up a neobank might be a safer and more economical bet for legacy banks to up their digital game, but legacy players need to act fast before neobanks swell to valuations that could "break the bank."

Interested in getting the full story? Here are two ways to get access:

1. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to the Banking Briefing, plus more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
2. Current subscribers can read the full briefing here.