Banking firm BBVA returned to reinvest in Neon, part of a group of digital banking portfolio companies it has built, increasing its stake to nearly 30%.

Financial services firm BBVA agreed on Monday to invest $300m in Brazil-based digital bank Neon in return for a 21.7% stake, a deal highlighting traditional banks’ interest in their emerging digital equivalents. Founded in 2016, Neon operates a digital banking platform with 15 million registered accounts and offers free checking accounts, credit and debit cards, small business products and payroll loans. The round takes the company’s total equity financing to $423m and increased BBVA’s overall stake to 29.7%, including the shares taken by the venture capital firm it funds, Propel Venture Partners. Propel had taken part in Neon’s last round, a $300m series C round in September 2020 also featuring digital payment processor PayPal’s corporate venturing unit, PayPal Ventures, having first backed it at series A stage. Another Brazil-based neobank, Nubank, went public in a $2.6bn initial public offering in December 2021, with existing investor Berkshire Hathaway, buying 10% of the offered shares. Traditional financial institutions have been feeling the pressure from newcomers and digital banks to integrate technology into their services, leading some to invest in those newer rivals. Investment banking firm Goldman Sachs’ growth equity arm invested $70m in UK-based digital bank Starling in April 2021, a month after Starling raised $376m in a round led by financial services firm Fidelity, with participation from Qatar Investment Authority, Railpen and Millenium Management. For BBVA, the investment is the latest in a string of investments in digital banking companies around the globe. It co-led a $55.6m round for UK-based mobile banking platform developer Atom Bank in April 2021 with Toscafund Asset Management, two years after backing a $62m round for the company as an existing investor. The bank also participated in a $224m round for Germany-based banking software developer SolarisBank in July 2021 at a valuation of $1.6bn, also as an existing shareholder. Carlos Torres Vila, BBVA’s chairman, said: “The commitment to innovation is part of BBVA’s DNA, and digital is opening new ways for us to grow in very attractive markets. Neon’s value proposition connects with the financial needs of Brazilians, serving as a platform to continue to grow rapidly in a market with great potential.” Photo courtesy of Neon Pagamentos S.A.

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Fernando Moncada Rivera

Fernando Moncada Rivera is a reporter at Global Corporate Venturing and also host of the CVC Unplugged podcast.